Dream Industrial Real Estate Invest Trst Q3 2025 Earnings Report

Dream Industrial Real Estate Invest Trst EPS Results

• Actual EPS: C$0.16
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Dream Industrial Real Estate Invest Trst Revenue Results

• Actual Revenue: $126.62 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Dream Industrial Real Estate Invest Trst Announcement Details

• Quarter: Q3 2025
• Date: 11/4/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, November 5, 2025
• Conference Call Time: 11:00AM ET

Dream Industrial Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust. Its portfolio comprises industrial properties located in key markets across Canada and the U.S. Its objective is to build upon and grow its portfolio and to provide stable and sustainable cash distributions to its unitholders. Geographically the business is organized into Ontario, Quebec, Western Canada, Europe and the USA. Substantial revenue is derived from the Canadian portfolio.

Dream Industrial Real Estate Invest Trst Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Reported 4.3% year‑over‑year FFO per unit growth and 6.4% comparative property NOI growth in Q3, driven by a 7.6% rise in in‑place rents, leasing of >250,000 sq ft and in‑place occupancy of 94.5%.
• Positive Sentiment: Balance sheet remained strong with CAD 828 million of available liquidity, net debt/EBITDA of 8.1x, ~70% of 2025 maturities addressed and a CAD 200M debenture issued at an all‑in 4.29% (euro‑swap to 3.73%).
• Positive Sentiment: Executing capital recycling and accretive deployment — ~CAD 150M of potential dispositions underway to redeploy into higher‑quality infill acquisitions; YTD acquisitions >CAD 100M targeting >7% stabilized yields and recent European buys delivered >8% going‑in yields.
• Neutral Sentiment: New revenue initiatives progressing — solar pipeline now >120 MW with two projects complete and five underway, and data‑center strategy advancing due diligence on 13 sites (>600 MW) with deposits to secure 105 MW, but meaningful CapEx and revenue certainty remain multi‑year and partner‑dependent.
• Neutral Sentiment: Healthy leasing momentum with >1.8M sq ft signed YTD at average spreads >40% and 1.7M sq ft of advanced negotiations post‑quarter, although longer tenant decision timelines have slowed absorption and trimmed committed occupancy to 95.4%.

Presentation

[Operator]

Welcome to the Dream Industrial REIT Quarter Conference call for Wednesday, November 5th, 2025. Please be advised that all participants are currently in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the queue, you may press star and then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and then zero. During this call, management of Dream Industrial REIT may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dream Industrial REIT's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information.

[Operator]

Additional information about these assumptions and risks and uncertainties is contained in Dream Industrial REIT's filings with security regulators, including its latest annual information form and MD&A. These filings are also available on Dream Industrial REIT's website at www.dreamindustrialrealestate.ca. Your host for today will be Mr. Alexander Sannikov, CEO of Dream Industrial REIT. Mr. Sannikov, you may now go ahead.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Thank you. Good morning, everyone. Thank you for joining us today for Dream Industrial REIT's Third Quarter 2025 Conference Call. Here with me today is Lenis Quan, our Chief Financial Officer. In the third quarter, we reported healthy operating and financial results supported by strong leasing spreads and robust growth in CPNOI. For the quarter, we delivered 4.3% year-over-year FFO per unit growth and 6.4% comparative property NOI growth, driven by a 7.6% increase in in-place rents. We leased out over 250,000 sq ft of vacancies and newly completed developments, which lifted our in-place occupancy 40 basis points to 94.5%. Our balance sheet remained strong with conservative leverage and ample liquidity. We are advancing our capital recycling strategy across our platform. During the quarter, we completed the sale of two non-strategic assets within the Dream Summit venture, and we are firm on a disposition within the REIT's portfolio.

[Alexander Sannikov, CEO at Dream Industrial REIT]

In addition, we are currently underway on approximately CAD 150 million of potential dispositions to user and investor buyers. These dispositions reflect our broader program to enhance portfolio quality and total return profile as we redeploy this capital into accretive opportunities, including higher quality acquisitions that align with our longer-term portfolio strategy. So far this year, we have acquired over CAD 100 million of infill mid-bay industrial product with a targeted stabilized yield of over 7%. These acquisitions are representative of our broader pipeline and of the asset profile we will continue to pursue. Recently, we completed the acquisition of a 130,000 sq ft asset in Germany. The asset was acquired on a short-term sale and lease-back arrangement at market rents, delivering a going-in cap rate of over 8%. The asset is well located, features functional design, and has existing rooftop solar panels to support our ancillary revenue program.

[Alexander Sannikov, CEO at Dream Industrial REIT]

The asset has undeveloped excess land, which can be activated for outside storage or expansion opportunities. In the quarter, we also completed the acquisition of a 90,000 sq ft urban logistics asset in the Netherlands. The asset is within a prime logistics node with scarce supply. We acquired the property vacant and leased out the building within the first months of ownership for a five-year term commencing in November at rent succeeding our underwriting. We achieved a yield on purchase price of over 8%. This leasing success is reflective of the healthy leasing and momentum we are seeing across a mid-bay portfolio in Europe. With over 2.5 million sq ft of leases signed to date in our European portfolio, we continue to see healthy demand for our assets and continued rental growth in core urban locations.

[Alexander Sannikov, CEO at Dream Industrial REIT]

In Canada, the occupier markets remain active, and we see sustained demand, in particular for well-located mid-bay infill assets. The leasing spread remains healthy. In our wholly owned portfolio in Canada, we achieved around 40% spreads in Q3 when adjusted for one fixed-rate renewal this quarter. This is in line with the spreads we achieved in Q3 2024. We continue to work closely with our tenants as they implement their supply chain adjustments in response to the evolving trade dynamics. Notably, we are encouraged by the level of activity from tenants in the automotive sector. So far this year, across our wholly owned and managed portfolios in Canada and in Europe, we signed over 1.8 million sq ft of new leases, renewals, and expansions, including on a built-to-suit basis, with automotive occupiers led by blue-chip multinational names.

[Alexander Sannikov, CEO at Dream Industrial REIT]

That is at an average spread of over 40% with mid-3% contractual escalators. While the RFP activity has been gradually ramping up from early Q2 2025 and our leasing pipeline remains robust, we are seeing longer decision-making timelines impacting the pace of absorption. While our in-place occupancy increased this quarter in line with our expectations, longer lease negotiations led to a slight decline in our committed occupancy to 95.4% this quarter. Since the quarter end, however, we have signed or advanced new lease negotiations on over 1.7 million sq ft on existing vacancies across our wholly owned and managed portfolios, leading to additional commitments. Turning over to our strategic pillars, partner capital formation remains a key focus for us as we are looking to grow our private partnerships revenue significantly over the next three to four years.

[Alexander Sannikov, CEO at Dream Industrial REIT]

The capital formation environment is improving as investors are shifting their focus from private credit to equity investments. We maintain an active dialogue with potential partners across our operating footprint, including in North America and Europe, and are encouraged by the progress we're making. Our solar program is progressing well, with two completed projects and five new projects underway in the quarter. Over the past year, our near-term pipeline has grown significantly, now representing more than 120 megawatts of additional solar generation potential in feasibility or advanced stages. We're making progress on our strategy to upgrade power capacity at select properties across the portfolio for data center users. We completed preliminary due diligence for 13 sites across Canada that could accommodate a critical load of over 600 megawatts.

[Alexander Sannikov, CEO at Dream Industrial REIT]

On two of these sites, we advanced deposits to local utilities to secure 105 megawatts of power with phased delivery over the next two to five years. Concurrently, we're in active discussions with operators and end users to explore potential value creation opportunities with the generated power capacity. Overall, we are encouraged by the progress across our key initiatives, including leasing, capital recycling, new revenue sources, positioning DIR well for the year ahead. I will now turn it over to Lenis to discuss our financial highlights.

[Lenis Quan, CFO at Dream Industrial REIT]

Thank you, Alex. Our business continues to deliver stable and consistent growth. We reported diluted FFO per unit of $0.27 for the third quarter, 4.3% higher than the prior year quarter. The solid year-over-year growth was primarily driven by comparative properties NOI growth of 6.4% for the quarter, led by 8.5% growth in Canada. In addition, lease-up of existing vacancies and newly completed developments contributed to overall FFO growth. Our net asset value at quarter end was $16.74 per unit, reflecting stable investment property values. We continue to actively pursue financing initiatives to optimize our cost of debt and maintain a strong and flexible balance sheet with ample liquidity. We ended Q3 with leverage in our targeted range and net debt-to-EBITDA ratio of 8.1x. To date, we have effectively addressed approximately 70% of our 2025 debt maturities.

[Lenis Quan, CFO at Dream Industrial REIT]

In July, we closed on the issuance of our CAD 200 million Series G unsecured debentures at an all-in rate of 4.29%. We will swap the proceeds to euros at an effective rate of 3.73% starting December 22nd, 2025. The proceeds were partly used to repay the outstanding balance on our credit facility, with the remainder earmarked towards pre-funding our remaining CAD 450 million maturity in December and for general trust purposes. We continue to evaluate several refinancing options to address the remaining debt maturity balance and are currently observing rates in the high 3% range in the Canadian unsecured market, with euro equivalent debt approximately 20 basis points lower. These rates are about 30 basis points lower than what we were seeing this time last year. We completed the quarter with over CAD 828 million in total available liquidity.

[Lenis Quan, CFO at Dream Industrial REIT]

Combined with the growing cash flow generated by our business, we are well positioned to fund our value-add and strategic initiatives, including our development pipeline, solar program, and contributing to our private capital partnerships. Our third quarter performance demonstrates the resilience of our business, and we remain confident in our growth trajectory for the balance of the year and into 2026. Despite a slower pace of leasing in the first half of 2025 as a result of trade tensions, we have delivered healthy organic growth supported by increasing in-place rents across our portfolio. Our FFO per unit continued to grow at a strong rate, even though we refinanced over 70% of our 2025 debt maturities early, as CPNOI has outpaced the higher interest expense.

[Lenis Quan, CFO at Dream Industrial REIT]

As our in-place occupancy stabilizes, we anticipate the business to produce even stronger NOI growth driven by contributions from stable to higher occupancy and continued growth of in-place rents. For the remainder of the year, we expect the in-place occupancy to remain stable. With that, our expectation is that the pace of CPNOI growth in the fourth quarter will be consistent with Q3. We also expect that our Q3 FFO per unit run rate to continue into the fourth quarter. As such, adjusting for early refinancing of our 2025 debt maturities, we expect the full year results to be aligned with our previously communicated outlook. Looking ahead, we continue to expect a strong pace of FFO per unit growth into 2026.

[Lenis Quan, CFO at Dream Industrial REIT]

Our FFO growth expectations for 2025 and 2026 continue to be predicated on current foreign exchange rates, leverage levels, and interest rate expectations, as well as expected timing of the lease-up of our transitory vacancies. I will turn it back to Alex to wrap up.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Thank you, Lenis. We have demonstrated a solid track record of delivering FFO growth while absorbing a 200 basis point increase in our average cost of debt since 2021. Since then, our FFO per unit has increased by approximately 30%, driven by organic NOI growth, contributions from developments, accretive acquisitions, and new revenue sources such as our private capital partnerships business. All of these growth drivers remain intact today, and we expect to continue delivering strong results for our unit holders. We will now open it up for questions.

[Operator]

We are now opening the floor for a question-and-answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Your first question comes from the line of Sam Damiani of TD Cowen. Your line is now open.

[Sam Damiani, Equity Analyst at TD Cowen]

Thank you. Good morning, everyone. Congratulations on the good results and stabilizing in the leasing market. That's great to see for another quarter. Maybe just to start off, Lenis, just to clarify your comments on the outlook for Q4 and into next year, just with the same property NOI growth, are you still expecting it to exceed 6% for this year and next year?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Sam, as you know, we generally do not provide guidance for 2026 at this point. I'll maybe pass it back to Lenis to clarify on the 2025 outlook.

[Lenis Quan, CFO at Dream Industrial REIT]

Yeah. So, Sam, we provided the build-up for the full year CPNOI growth in the prepared remarks. I think the commentary was that the growth that we're seeing for Q3 would be very similar to what we would see year-over-year for the fourth quarter as well.

[Sam Damiani, Equity Analyst at TD Cowen]

Okay. That is clear. Just on FFO growth, you are reiterating your target. Again, your commentary, I think last quarter was similar or higher growth in 2026. Is there any change to that outlook?

[Lenis Quan, CFO at Dream Industrial REIT]

No. No. I think we continue to hold that same outlook.

[Sam Damiani, Equity Analyst at TD Cowen]

Okay. Great. All right. Maybe just on the partnerships, Alex, you touched on that. Can you maybe give us a little bit more color on the progress and sort of status of things as you work toward a potential JV over in Europe?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Thanks for the follow-up, Sam. As you know, capital formation of this nature takes time. We're in dialogue with lots of strategic partners. I think for us, it's very important or as important to set up the right partnership as it is to set up a partnership or grow that business. We're pretty focused on the profile of the partnership and where it's going to grow, what potential it has, and that informs the groups that we are in dialogue with. Naturally, that takes some time. As I mentioned in the prepared remarks, we are encouraged by the progress. That's across the footprint. We're seeing good progress in North America and good progress in Europe as well.

[Sam Damiani, Equity Analyst at TD Cowen]

Thank you. I'll turn it back.

[Operator]

Our next question comes from the line of Brad Sturges of Raymond James. Your line is now open.

[Brad Sturges, Managing Director at Raymond James]

Hey, good morning. Just following up on Sam's question there just on the partnerships. I think you talked about maybe seeing a little bit more traction around a greenfield fund or partnership. Is that still the case, or are you seeing good progress across different types of investment opportunities, including core funds?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Yeah. We are seeing most traction, I would say, across the core plus to value-add spectrum of return profile. The nature of the partnership can be greenfield, as we call it, which means we just form capital to pursue new acquisitions, or it can involve some seed assets, as we discussed previously.

[Brad Sturges, Managing Director at Raymond James]

Okay. That's helpful. My other question would be just in terms of capital allocation, obviously, you've got potentially some capital coming back through asset sales. How would you rank sort of the opportunity set in terms of redeploying into your various buckets of growth? Also, your payout ratio continues to trend down. What would it take, I guess, to kind of see a distribution increase as well as you continue to realize AFFO growth or FFO growth?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Yeah. Thank you for the follow-up, Brad. On the FFO growth and payout ratio, yeah, your observation is very much aligned with ours, but also is aligned with the overall strategy we communicated at the investor day in terms of how we think about the distribution policy. We want to see our payout ratio continue trending down. Over time, we see ourselves implementing a distribution policy that would translate into sustained growth in distributions per unit. That growth will be somewhat lower than the pace of growth in free cash flow so that the payout ratio continues to decline and the free cash flow continues to compound for the business. There is no change to that broad philosophy, if you will. The only thing that we have not yet communicated, and it is an ongoing conversation, is the timing of when we are going to implement this.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Policy, if you will. We will obviously communicate it to the market, but the business is well positioned. As you observed with the Q3 results as well. When it comes to capital allocation, nothing has changed really in terms of how we think about it relative to the prior quarter. We continue to see good opportunities that are proprietary to the business, and that includes investing in our private partnerships, including our intensification opportunities, whether it is excess land or solar. Some of the acquisitions that we are pursuing and highlighting in the Q3 results are at pretty compelling returns, as you can see. We are looking at the unit price and availability of capital as to whether continued NCIB activity would make sense. All of these opportunities are on the list, and we continue evaluating them as we get capital.

[Brad Sturges, Managing Director at Raymond James]

Just to go back to the distribution comment there, I guess it's a quarter-by-quarter basis you're reviewing it. At this point, no decision has been made on that. Are we getting closer, at least, to maybe seeing a more formal policy around annual distribution increases?

[Alexander Sannikov, CEO at Dream Industrial REIT]

We will communicate as soon as we're ready. It's an ongoing dialogue that we're having with the board and the monthly management team.

[Brad Sturges, Managing Director at Raymond James]

Yep. Thanks a lot. I'll turn it back.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Thank you, Brad.

[Operator]

Your next question comes from the line of Himanshu Gupta of Scotiabank. Your line is now open.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank]

Thank you and good morning.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank]

So.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Morning, Himanshu.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank]

What are your thoughts on 2026 lease expiries? Any space you're expecting back? What kind of rental spreads should we assume?

[Alexander Sannikov, CEO at Dream Industrial REIT]

We generally don't expect to see material changes to our retention ratio in 2026. Himanshu, as you know, over the last decade, we've averaged at around 70%-75% pretty consistently. We expect that retention ratio to carry into 2026 without any material deviations. Yes, there will be some space coming back to us, but that's normal course for our portfolio. As far as rental spreads, as you know, we disclose the expiring rents in the MD&A, and we also disclose the market rents. We expect market rents to be consistent with the overall market rents for the respective regions for 2026 expiries. There's no idiosyncratic space that is coming back to us or that is maturing in 2026.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank]

Got it. In that context, should we assume kind of stable occupancy into next year as well?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Generally speaking, yes. We'll provide more color on 2026 outlook in February, as we always do, Himanshu.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank]

Okay. Fair enough. Okay. And then looking at the development project. With the development specifically, I think that was expected to be completed this quarter, around this time. Is it leased up, or how is the progress on the lease up there on that property?

[Alexander Sannikov, CEO at Dream Industrial REIT]

It's getting completed. It's not fully complete, so it still is underway. There's still some work happening at the site. The leasing progress has been encouraging. We see good volume of RFPs for that asset, including for smaller footprints. The asset demises into smaller units as little as 50,000 sq ft all the way up to the full building. This development is two buildings of about 200,000 sq ft each. We see RFP activity for the entire range and generally are encouraged by the feedback and how the asset is positioned in the market.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank]

Okay. Good to hear that.

[Alexander Sannikov, CEO at Dream Industrial REIT]

That's mainly right now.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank]

Yeah. Maybe just a follow-up on this. Is the new leasing environment relatively softer compared to the renewal activity, would you say?

[Alexander Sannikov, CEO at Dream Industrial REIT]

As we've commented before, we've seen a new leasing environment. Gradually improving throughout the second half of 2025, following a muted first quarter. That is reflected in the lease up that you see across our portfolio. That is reflected in our in-place occupancy as well, and the progress on our new developments is reflected in that. We've signed a few leases this quarter within our new developments, both for wholly owned portfolio and some more managed developments, with good pipeline for the balance. The pipeline has actually improved relative to, let's say, August when we reported last time.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank]

Got it. Thank you. Just last question. Federal budget was announced last night. Big infrastructure spending being proposed. Do you see any read-through for your portfolio or industrial leasing demand in general for that?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Yeah. We're obviously digesting the budget as everyone else is in the market. One notable area where we see incremental demand is defense. We have already seen the increased defense spending and increased sort of defense focus translate into incremental demand for industrial in Canada in our portfolio. Early signs of that, and we expect to see more of it as this develops.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank]

All right. Fair enough. Thank you, guys. I'll turn it back.

[Operator]

Your next question comes from the line of Mike Markidis of BMO Capital Markets. Your line is now open.

[Mike Markidis, Managing Director at BMO Capital Markets]

Thanks, Operator. Alex, good to see, I guess, the progress on the data center initiative. I think you said two deposits put down. When you can help us understand, I guess, stage delivery, two- to five-year timeline. How does that work? You put a deposit down. Who actually funds the infrastructure? I guess I'm trying to get a sense of how the CapEx will build as you continue to get more and more approvals at the municipal level for power.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Thank you, Mike. Yeah. So far, the deposit that we advanced, our refundable deposit, this just secures our place in the queue and allows us to engage with occupiers on definitive timelines with definitive power capacity and delivery schedule. As we advance the infrastructure work for these sites, then it will require incrementally more capital to then have more firm visibility into power timelines. The big capital outlay will be obviously the construction itself. What our priorities are right now is to secure either a JV partnership or a partnership with an operator or a lease on a power chill basis so that we can continue investing capital with greater certainty of the revenue side of the equation.

[Mike Markidis, Managing Director at BMO Capital Markets]

Okay. If it's not, if it's two to five years out in terms of stage delivery, does that mean that substantial capital isn't really in the pipeline for 2026 and really 2027 at this point?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Not for 2026. Could be for 2027, depending on how quickly we advance some of these projects.

[Mike Markidis, Managing Director at BMO Capital Markets]

Okay. And then just as you're contemplating, I know a lot of things in the air, but it sounds like you wanted to engage with occupiers on the site. I mean, is this something where you would potentially build on a spec basis or no, would you have to have a user lined up?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Complete spec development would be unlikely at this point. We will want to secure some components of the revenue at least to proceed.

[Mike Markidis, Managing Director at BMO Capital Markets]

Okay. Thanks for that. Just last one for me before I turn it back. Obviously, a lot of focus on building the private capital partnerships. You said you gave us good color in terms of what the demand profile looks like in terms of core plus and value add. I was just curious. You guys have been pretty quiet in the U.S. ever since forming the U.S. JV. Is that market something that's on your radar screen at all, or is it highly unlikely in the next 12 to 24 months?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Thank you for that question, Mike. It actually is on the radar incrementally more now than, let's say, earlier this year. For the last couple of years, let's say, we haven't really seen strong opportunities in the U.S. and that's why the partnership also hasn't been growing. We are focusing a little bit more on growing that vehicle now and seeing good reactions from potential investors. And also are starting to see more interesting opportunities in the U.S. as fundamentals start improving in certain markets. I don't expect us to do anything sizable, but definitely incrementally, we're looking at growing that part of the business.

[Mike Markidis, Managing Director at BMO Capital Markets]

That's great. That's it for me. Thanks very much.

[Operator]

Your next question comes from the line of Kyle Stanley of Desjardins. Your line is now open.

[Kyle Stanley, Director at Desjardins]

Thanks. Morning, everyone.

[Kyle Stanley, Director at Desjardins]

Maybe just going back to Mike's questions on the data center side. I mean, clearly, data center investment is very topical today. Every second article we see is something about AI or data center investment. Has anything changed from when you first brought this up as a strategy last year at your investor day in terms of your desire to invest in this asset class or maybe the pace at which you expect it to become a part of the portfolio, just given this enhanced focus?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Thanks, Kyle. We continue to see additional data points that reinforce the thesis. As you know, we're not buying land to build data centers. We are looking at it, at least for now, more from a highest and best use perspective for existing sites and existing assets. So far, everything we've seen, especially with the level of CapEx that goes into AI facilities or AI powering data centers, is encouraging for the thesis.

[Kyle Stanley, Director at Desjardins]

Okay. Thanks for that. Maybe just as you kind of are working through current leasing discussions, has next year's review of USMCA come up at all? Are tenants concerned? Is it maybe impacting the term they're looking at for new leases? Just like any commentary on the impact this is either having or not having at all. As you're doing your leasing today?

[Alexander Sannikov, CEO at Dream Industrial REIT]

We are not really seeing that impacting leasing decisions in terms of how occupiers are thinking about their footprints. It rarely comes up as a discussion point. If anything, we've seen a little bit more occupiers recently asking for longer lease terms as they are looking to invest in their space and they need term security. We've seen a little bit more of that over the last three to six months.

[Kyle Stanley, Director at Desjardins]

Okay. That's encouraging. Just the last one. Recent broker market stats highlighted softness in Montreal. I think this was probably expected and influenced by the Amazon departure this year. Just love your thoughts on the state of the leasing environment in Montreal, how you see your portfolio evolving through maybe the soft patch and when you'd expect that market to firm up a little bit.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Yeah. In Montreal, it's a bifurcation between a larger bay and smaller bay, small to mid-bay facilities. We see ongoing demand and leasing strength, and spreads are strong for mid-bay leasing, and that's reflected in our stats this quarter. Adjusted for a fixed-rate renewal that we mentioned in the prepared remarks, our spreads in Montreal or in Quebec were 50%, which are pretty healthy relative to last year or the prior periods. When it comes to larger footprints, that's where we see more supply. That's most of the Amazon sublet footprint. All of it is larger bay facilities, and we're seeing a bit less demand for those kinds of footprints, and that translates into maybe softness in that segment of the market. Most of our portfolio is addressing kind of small to mid-bay requirements and is.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Seeing good traction when it comes to new leasing and when it comes to renewals.

[Kyle Stanley, Director at Desjardins]

Okay. Thanks for that. I will turn it back.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Thank you.

[Operator]

Again, if you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Your next question comes from the line of Matt Kornack of National Bank Financial. Your line is now open.

[Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial]

Hey, guys. Just quickly on the market rent trajectory. It looks like Western Canada is improving. Toronto's kind of stable. Montreal is in a little bit of pressure, albeit off some pretty lofty highs. How should we think about, from your earlier comment, it sounds like you're expecting those levels to kind of stick at current levels. When should we expect or do you think there is an inflection coming in market rents over the next year or two?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Matt, broadly, we maintain the outlook that market rents are driven by the overall trajectory of availability rates in any given market. As we see continued absorption in the GTA, in Calgary, and over time in Montreal, we expect to see, obviously, overall availability rates stabilizing and start trending downwards. That is when we expect to see the inflection point overall in terms of market rent development. In the meantime, and I think it is important to highlight, even in today's environment that is arguably softer than, let's say, three years ago, we are signing leases routinely with 3%-3.5% escalators for three- to ten-year terms. That continues to be very much part of the leasing equation for Canada.

[Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial]

Makes sense. This quarter, I mean, the hit to kind of committed occupancy was mostly in Western Canada. It sounds like you've got part of that space spoken for, but can you give us a sense of the dynamics there and the timeline on kind of getting back because you had really high committed occupancy in Q2 in that portfolio.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Yeah. Dynamics are remarkable. We got indeed some space back, about 100,000 sq ft in Edmonton. That was late summer, early fall. Within a month, we relet the entire 100,000 sq ft to two occupiers. They will both be commencing in fourth quarter. That committed occupancy will go for that particular asset, and in Edmonton overall, will go back up within a couple of months.

[Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial]

Okay. That's helpful. Interesting and a little counterintuitive in terms of the auto demand that you're seeing. What would be the rationale for them taking that space at this point? Is it a relocation, or is that new space in the market?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Some of it net new space. Some of it is optimizing their supply chains across North America. Some of it is net new entrance into Canada. For tier one automotive, that is in our managed portfolio. We just signed a 200,000 sq ft lease with a tier one automotive group. We have expanded a couple of multinational OEM groups. It is a range, but mostly driven by ongoing kind of optimization of supply chains when it comes to the automotive sector.

[Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial]

Generally good credits, I assume, but what sort of terms on those leases?

[Alexander Sannikov, CEO at Dream Industrial REIT]

The terms range from 5 to 10 years. Very good credits. So these are tier one groups or blue chip multinational OEMs.

[Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial]

Okay. Sure. Lastly, a technical one. The tax on the European portfolio, it was a bit higher. It is a little over EUR 1 million this quarter. Is that a new run rate because the euro has appreciated, or should we expect it to come back down to around EUR 750,000 or so?

[Lenis Quan, CFO at Dream Industrial REIT]

Yeah, the tax. There is a little bit coming from the U.S. and a little bit from the euro. It is probably a decent run rate. We would have had maybe some lower credits from the prior quarter. I would probably say in and around that range is a decent run rate. Obviously, as we grow our income in Europe, that will slide accordingly as well.

[Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial]

Okay. All right. Thanks. Congrats on a solid quarter, guys.

[Lenis Quan, CFO at Dream Industrial REIT]

Thanks.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Thank you, Matt.

[Operator]

Question comes from the line of Tal Woolley of CIBC. Your line is now open.

[Tal Woolley, Executive Director at CIBC]

Hi. Good morning, everybody. Just on the data center strategy. Can we call these pilots, or is this really the official start of this strategy?

[Alexander Sannikov, CEO at Dream Industrial REIT]

It depends on your definition for pilot. Look, the way we're thinking about it is we are making progress on a few tangible opportunities in terms of securing power. Maybe the official start of the strategy will be as we firm up the revenue model. Then we can credibly talk about how replicable any given project is, and then it becomes more of a program.

[Tal Woolley, Executive Director at CIBC]

The current sites right now, those are largely vacant assets or development land? Can you just talk a little bit about the current sites you're looking at?

[Alexander Sannikov, CEO at Dream Industrial REIT]

The two sites for which we advanced deposit are both existing assets. They're solid buildings, but the data center potential is far stronger from a return standpoint. We have generally redevelopment rights or very short leases on these sites, allowing us to then tangibly pursue data center strategies for these assets.

[Tal Woolley, Executive Director at CIBC]

Got it. Also, can you give us an idea of how we should think about, I am not exactly familiar with when you guys want to acquire power, that process and how much it sort of costs to walk through that?

[Alexander Sannikov, CEO at Dream Industrial REIT]

Yeah. When it comes to the process of acquiring power, it's very specific to each utility, specific to each location. That's why we shortlisted 13 sites. Of the 13 sites, some are getting to power faster. The rest of the sites are still very much on the list, and we are continuing to advance the dialogue there. CapEx really ranges per asset. What we will do as we firm up the plans for any given site, we will articulate the CapEx, the CapEx phasing, and the revenue model to our investors and everyone who follows the company, for them, for you to understand how we're thinking about it and what's involved. It's a bit premature to comment on that, but we will definitely provide the details as we make progress.

[Tal Woolley, Executive Director at CIBC]

Perfect. There was an earlier question about the Kuzma renegotiation coming up ahead, and I appreciate you're talking to clients and you're not maybe hearing much from them. I guess I'm just wondering more, what is your internal base case about how you guys are thinking about how that might impact leasing activity, given your experience this year?

[Alexander Sannikov, CEO at Dream Industrial REIT]

We think that this longer decision timelines are likely going to stay until there's certainty on that front. What we are seeing, though, is that decisions are happening. They're just happening at a slower pace. Our pipeline keeps building and keeps growing. As it grows to a large enough level, we will see consistent flow of signed commitments, and we can very much operate in that environment. We expect that that longer decision timeline phenomenon is here to stay until there's clarity.

[Tal Woolley, Executive Director at CIBC]

On the partner capital or partnership capital side, has there been any real impediments that you found kind of working through the process right now? Just in terms of market conditions or other things that have maybe slowed this process down?

[Alexander Sannikov, CEO at Dream Industrial REIT]

has been a lot of changes in terms of how many global pension funds are organized over the last 12-24 months. Lots of changes in terms of how they think about real estate relative to overall real assets portfolios. That has impacted capital formation processes broadly. It is kind of well documented that capital formation timelines have been longer over the last two to three years than normal. We are starting to see that changing. We are also starting to see groups shifting focus back to equity investments from credit investments. All these things are likely going to be helpful for what we are trying to achieve.

[Tal Woolley, Executive Director at CIBC]

Perfect. Appreciate the call. Thanks, everyone.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Thank you so much.

[Operator]

Our next question comes from the line of Tommy Bear of RBC Capital Markets. Your line is now open.

[Tommy Byrnes, SVP at RBC Capital Markets]

Thanks. Good morning. You mentioned, Alex, that the pipeline is growing from a leasing standpoint. How much of that 1.7 million sq ft, I think you mentioned, in terms of leases that are in progress, how would that compare to perhaps some of the recent quarters? How much of that do you see is likely getting done?

[Alexander Sannikov, CEO at Dream Industrial REIT]

I would say it's 50-70% larger in terms of deals that are sitting in pipeline. So yeah, it is a notable increase. When it comes to the conversion rate, look. These are all tangible requirements. So. We expect that many of them will convert. It's just a question of time. A lot of groups are being very cautious when it comes to new footprints. If it's 3PLs, they want to make sure that they have their contract secured. When it comes to end users, it takes quite a bit of approvals internally to get things going. There are some leases that we signed this quarter for new developments that have been in negotiations for six months. So yeah, they do convert. The commitments do get signed. It just takes longer to get there. Hence, the pipeline is growing.

[Tommy Byrnes, SVP at RBC Capital Markets]

Just to clarify, none of that, or is any of that 1.7 million sq ft in your committed occupancy numbers?

[Alexander Sannikov, CEO at Dream Industrial REIT]

No. Not yet.

[Tommy Byrnes, SVP at RBC Capital Markets]

None of it, right? Okay. Just coming back to the comment around dispositions, the CAD 150 million, what's the sense of timing here? If you can maybe just provide some color around the geographic mix. I think if I recall, some of that might be Saskatchewan, but just if you can provide an update on that, that'd be great.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Yeah, indeed. Our Saskatchewan portfolio is in our non-strategic bucket. So we are looking to sell some of these assets or most of these assets over time. There's some user buildings in the GTA within the pipeline as well. In terms of overall timeline, we'll expect to see some firm up or even close in the first quarter of 2026.

[Tommy Byrnes, SVP at RBC Capital Markets]

Just lastly, on the European JV, I think you mentioned potentially seeding some of that potential JV or JVs with some of your existing portfolio. How much would you consider perhaps vending in, and what sort of retained interest would you be considering?

[Alexander Sannikov, CEO at Dream Industrial REIT]

I think it's a bit early to comment. What we are seeing generally is more interest in a 50/50 JV in Europe. From a stake standpoint, that is more likely than any other stake. As far as the quantum of a potential seed portfolio, that is a little bit too early to comment on.

[Tommy Byrnes, SVP at RBC Capital Markets]

Okay. Thanks very much. I'll turn it back.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Bye.

[Operator]

This concludes the question and answer session. I would now like to turn the conference back over to Mr. Sannikov for any closing remarks.

[Alexander Sannikov, CEO at Dream Industrial REIT]

Thank you for your interest and support of Dream Industrial REIT. We look forward to reporting on our progress next quarter. Goodbye.

[Operator]

This brings to a close today's conference call. You may now disconnect. Thank you for participating and have a wonderful day.

Participants

Analysts

• Himanshu Gupta, Director and Equity Research Analyst at Scotiabank
• Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial
• Mike Markidis, Managing Director at BMO Capital Markets
• Tal Woolley, Executive Director at CIBC
• Brad Sturges, Managing Director at Raymond James
• Tommy Byrnes, SVP at RBC Capital Markets
• Lenis Quan, CFO at Dream Industrial REIT
• Kyle Stanley, Director at Desjardins
• Sam Damiani, Equity Analyst at TD Cowen
• Alexander Sannikov, CEO at Dream Industrial REIT