Dream Industrial REIT Announces Strategic Partnership With CPP Investments and $805 Million Portfolio Recapitalization

Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.TORONTO — Dream Industrial Real Estate Investment Trust (TSX: DIR.UN) (the “Trust” or the “REIT” or “DIR” or “we” or “us”) is pleased to announce a strategic partnership with Canada Pension Plan Investment Board (“CPP Investments”), marking a significant new growth initiative for the REIT as it continues to add scale to its private capital partnership business. Under a definitive agreement, DIR has agreed to sell a portfolio of 12 Canadian industrial assets totaling 3.6 million square feet across Ontario, Quebec, and Alberta (the “Initial Portfolio”), to a newly formed joint venture between CPP Investments and DIR (the “Joint Venture”) (collectively, the “Transaction”).

The Joint Venture is acquiring the Initial Portfolio for a purchase price of $805 million, with pricing slightly above IFRS value of the Initial Portfolio. The Trust’s IFRS NAV represents a significant premium to current trading price of the REIT’s units.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.The Joint Venture will be 10% owned by DIR and 90% owned by CPP Investments. CPP Investments and DIR have allocated $1.1 billion of equity capital, in aggregate, to the Joint Venture to be deployed over time, with the intention of acquiring up to $3 billion of additional industrial assets in Canada.said Alexander Sannikov, Chief Executive Officer of Dream Industrial REIT.The Initial Portfolio comprises 12 assets (27 buildings) that are representative of the overall quality of DIR’s wholly owned Canadian portfolio. By GLA, 37% of the Initial Portfolio is in the Greater Toronto Area (“GTA”), 36% is in Montreal, 24% is in Calgary and 3% is in London, Ontario. The average in-place and committed base rent for the assets in the Initial Portfolio was approximately $11 per square foot as at September 30, 2025 with a weighted average lease term of approximately three years.See Figure 1, Initial Portfolio by GLA as at September 30, 2025Key characteristics such as the average year built, clear height, and geographic split of the Initial Portfolio are similar to DIR’s wholly-owned Canadian portfolio. As at September 30, 2025, the Initial Portfolio’s in-place and committed occupancy was below DIR’s Canadian portfolio average. The Transaction is expected to increase the Trust’s in-place and committed occupancy with no material change to the spread between in-place and estimated market rent for its Canadian portfolio.CurrentWholly-Owned Canadian PortfolioPro FormaWholly-Owned Canadian PortfolioOwned GLA (in thousands of square feet)20,37316,797In-Place Occupancy93.5%93.7%In-Place and Committed Occupancy94.3%94.5%Mark-to-Market Potential(1)19.9%19.2%*As at September 30, 2025(1) Calculated as estimated market rent to in-place and committed base rent spread (%)The Joint Venture intends to pursue a value-add strategy focused on acquiring assets with material existing vacancy, near-term lease-rollover, larger capital investments, and/or intensification and redevelopment opportunities.See Figure 2, Highlighted Assets from the Initial PortfolioA subsidiary of DIR will provide property management, capital expenditure management, and leasing services to the Joint Venture at market rates. A subsidiary of Dream Unlimited Corp. (“Dream”) (TSX: DRM) will be the asset manager for the Joint Venture. DIR’s interest in the Joint Venture will be managed under the same terms as its current asset management agreement with Dream.The Initial Portfolio will be sold to the Joint Venture on an unencumbered basis. The Transaction is expected to close in two similar-sized tranches over the course of H1 2026 and is subject to customary closing conditions.The Transaction represents a compelling value to the Trust on the Initial Portfolio. The purchase price of $805 million is slightly above the current IFRS value. The Trust’s IFRS NAV as at September 30, 2025 was $16.74 per unit representing over 37% premium to the last closing price of the REIT’s units on December 16, 2025.The Transaction is a strong validation of the institutional quality of the Trust’s assets, with the Initial Portfolio being representative of the Trust’s overall portfolio quality. It highlights the continued strength of the private transaction market for urban industrial assets in Canada and confidence in the industrial fundamentals from leading global institutional investors.The formation of the Joint Venture underscores the strength of the Dream Industrial platform and its appeal to leading institutional investors.

The Joint Venture will further accelerate the growth of the Trust’s property management business, enhancing the return on invested capital. As the Joint Venture reaches its target scale, the Trust expects that it will contribute to the growth in its property management and leasing margin of over 40%.The strategy of the Joint Venture is complementary to the Trust’s strategy for its wholly owned portfolio and its existing private capital partnerships in Canada.

The Joint Venture is expected to increase the Trust’s already well-diversified sources of capital. With the expanded scope of capital sources, the Trust is well positioned to pursue accretive growth initiatives opportunistically at different points in the business cycle.In addition to contributing to the growth of the Trust’s private capital partnerships, the Transaction is a continuation of the Trust’s ongoing capital recycling strategy. Since 2019, the Trust completed over $900 million of dispositions and reinvested the net proceeds into accretive initiatives.The Trust expects to receive over $730 million in net proceeds, following the new debt financing of the Initial Portfolio within the Joint Venture. These proceeds are expected to be allocated towards a combination of unit buybacks and strategic growth initiatives on an accretive basis.The Trust anticipates the Transaction to be accretive to its diluted FFO per unit on a leverage neutral basis. The annualized run rate accretion to 2026 diluted FFO per unit is expected to be in the low to mid-single digit percentage on a leverage neutral basis upon intended deployment of proceeds. We expect that the proceeds from the transaction will initially be utilized towards repaying existing indebtedness, and subsequently, the Trust expects to deploy the proceeds as follows, subject to market conditions:The Trust intends to suspend its Distribution Reinvestment and Unit Purchase Plan (the “DRIP”) effective as of the distribution payable on January 15, 2026 to unitholders of record as at December 31, 2025 (the “December Distribution”). The DRIP will remain suspended until further notice and commencing with the December Distribution, distributions of the Trust will be paid only in cash. Upon reinstatement of the DRIP, plan participants enrolled in the DRIP at the time of its suspension who remain enrolled at the time of its reinstatement will automatically resume participation in the DRIP.The Trust remains committed to maintaining its credit rating with Morningstar DBRS, which was recently upgraded to BBB (High). The Trust expects to continue reducing its leverage over time, as measured by its Net Debt to Normalized Adjusted EBITDAFV ratio, consistent with its trajectory over the past few years. The Trust anticipates its leverage metrics will remain consistent with its current leverage profile proforma the contemplated uses of proceeds from the Transaction.said Lenis Quan, Chief Financial Officer of Dream Industrial REIT.The REIT has held the assets in the Initial Portfolio for over 10 years on average, generating an unlevered IRR in excess of 10% over this period. At the proposed sale price for the 90% interest in the Initial Portfolio, the Transaction will generate a gain of approximately $317 million relative to the Initial Portfolio’s historical cost basis.Consistent with the Trust’s financial disclosure, the Trust expects an incentive fee to be payable as a result of the disposition gains from the Initial Portfolio. The Trust and Dream have agreed to settle the incentive fee at closing by way of 75% cash and 25% in units of the Trust at a price of $16.74 per unit, representing the REIT’s IFRS NAV as at September 30, 2025. The actual incentive fee payable would be calculated based on the Trust’s actual financial results for the year ending December 31, 2026.The Transaction reinforces the Trust’s focus on executing across its core pillars, further increasing the proportion of modern mid-bay infill assets in its target markets through acquisition and development, driving organic growth through active leasing strategies and embedded lease escalators, driving ancillary revenue streams and growing its private capital partnerships business.said Bruce Traversy, Chief Investment Officer of Dream Industrial REIT.Thus far in 2025, the Trust has closed on over $115 million of acquisitions at an average mark-to-market cap rate of 7%. The Trust is currently in various stages of negotiations and due diligence on over $600 million of acquisitions of infill mid-bay assets in its target markets across Europe and Canada with an average target going-in cap rate of over 6%. Additionally, the Trust is currently pursuing multiple intensification projects on its existing sites and is adding further scale to its renewable energy pipeline at target yields on cost of 7% to 10%.The Board of Trustees of Dream Industrial REIT and a Special Committee comprised of independent trustees have unanimously approved the Transaction.

The Special Committee was established to oversee the negotiation process and ensure the Transaction aligns with the best interests of unitholders.TD Securities is acting as exclusive financial advisor to DIR. National Bank is acting as independent financial advisor and Goodmans LLP is acting as independent legal counsel to the REIT’s Special Committee.Dream Industrial REIT is an owner, manager, and operator of a global portfolio of well-located, diversified industrial properties. As at September 30, 2025, the REIT has an interest in and manages a portfolio comprising 340 industrial assets (552 buildings) totaling approximately 73.2 million square feet of gross leasable area in key markets across Canada, Europe, and the U.S. The REIT’s objective is to deliver strong total returns to its unitholders through secure distributions and growth in net asset value and cash flow per unit, underpinned by its high-quality portfolio and investment-grade balance sheet. Dream Industrial REIT is an unincorporated, open-ended real estate investment trust. For more information, please visit www.dreamindustrialreit.ca. https://www.businesswire.com/news/home/20251216420776/en/ContactsFor further information, please contact: Dream Industrial REIT Alexander Sannikov President & Chief Executive Officer (416) 365-4106 asannikov@dream.ca Lenis Quan Chief Financial Officer (416) 365-2353 lquan@dream.ca#distroPostmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.