Q2 2025 Dream Industrial Real Estate Investment Trust Earnings Call
Good day everyone and welcome to the Dream Industrial REIT second quarter conference call for Wednesday, August 6th, 2025.
Please be advised that all participants are currently in a listen-only mode. And the conference is being recorded.
After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star and then 1 on your telephone keypads. Should you need assistance during the conference call, you may send for an operator by pressing star and zero.
During this call management of dream industrial reap 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 REITs control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information.
Additional information about these assumptions and risks and uncertainties is contained in dream industrial reads filings with Securities Regulators, including its latest annual information form and mdna.
These filings are also available on Dream Industrial REIT's website at
Your host for today will be Mr. Alexander Santos. CEO of dream. Industrial Reed, Mr. Soph, please proceed.
Thank you. Good morning everyone. Thank you for joining us today. For dream industrial, reach second quarter 2025 conference. Call here with me today is lannis Juan our Chief Financial Officer.
In the second quarter, we delivered healthy operating and financial results supported by strong, leasing spreads and Healthy Growth in cpni.
For the quarter, we delivered 4% year-over-year, ff4 per unit growth and 5% comparative properties. In AI growth driven by 9.5% increase in in place rents.
Since the end of Q1, we have signed 3.3 million square feet of leases at an average spread of 20%, which lifted our occupancy to 96%.
60 basis points higher than last quarter and led to approximately 70% tenant retention.
Reached balance sheet and 59 million through the dream Summit Venture since the end of q1.
These Investments were complemented by a nineteen million non-core asset disposition in the dream, some adventure with an additional hundred million dollars in disposition pipeline.
The balance sheet remains strong with conservative leverage and ample liquidity.
Our second quarter results underscore the strengths of our assets and the resilience of our business.
Renewal activity across the portfolio, remained healthy. And we are achieving our targeted rents.
leasing momentum and vacancies with strong through late Q4, 2024 and enter early 2025
While activity moderated between February and April amid trade disruptions and headwinds, since May, we have seen a notable uptick in activity, with RFP volume strengthening considerably in the past months.
since the end of q1, we signed leases for 1.1 million. Square ft on vacant or newly developed space and successfully retained. 2.2 million square. Ft of previously uncommitted expiries.
Driving occupancy. Gaze across all regions.
On the development leasing front. We continue seeing good traction.
In the quarter, we signed a 78,000 square foot lease at our Redevelopment property located near the port of Montreal representing approximately 35% of space commencing and commencing in November.
The lease signed with an existing tenant in our European portfolio. Now anchors are repositioning strategy for the asset.
In bsac, we signed a 53,000 square foot lease for a 20 acre Greenfield development, increasing occupancy to 776%.
At the nearby 50 acre, Greenfield development was secured a 108,000 square foot lease. Bringing occupancy occupancy to 62%
This last deal was driven specifically by shifting trade Dynamics, as the tenant transitioned from routing Goods through the US to shipping directly into Canada, which prompted their expansion in Alberta and highlights how evolving Supply chains are creating new leasing opportunities.
Both leases are scheduled to commence in Q4.
And we continue to see a strong pipeline at both sites with leases in negotiation expected to push occupancy above 90% by the year end.
Additionally, we are engaged in various stages of negotiations. On 1.7 million square feet of space across developments. Within our wholly owned portfolio and private ventures in Canada.
So overall operationally we are seeing encouraging Trends in terms of leasing velocity which combined with shrinking Supply pipeline informs. Our constructive outlook on the occupier fundamentals in our key markets.
Turning over to capital allocation, we are pursuing a balanced approach to deploying our retained cash flow and proceeds from dispositions, while preserving balance sheet strength and flexibility.
We're actively executing on our Capitol recycling program and have observed increased interest in the private Market with demand translating into attractive, pricing for our assets.
In July the dream Time adventures sold in North strategic Assets in western Canada for 19 million dollars which was well, above its carrying value.
We have approximately 100 million dollars of assets, under letters of intent or in advanced negotiations with users and investors across our owned and managed portfolio.
All at compelling valuations.
We are reinvesting. These proceeds into a creative opportunities that drive long-term, cash flow, and nav growth.
Earlier this quarter, we took advantage of the unit price volatility and repurchase 1.9 million units at a weighted average price of $10.42 cents under our ncib program.
During the quarter, we completed the acquisition of a 178,000-square-foot asset in the Netherlands for $19 million.
With approximately 80% of the space rolling over, we are pursuing a value-add redevelopment strategy for the asset.
We expect to stabilize the property at an attractive yield on purchase price of just under 10%.
When factoring in the capital investment, we anticipate making the overall yield on cost. We expect is 8.5%.
In July. We acquired a 192,000, square, foot asset enrichment Hill for Millions.
Representing a 6% going in cap rate.
The asset is fully leased to 4 tenants.
2 of which are on long-term leases at Market rents.
Uh, with 3 to 3 and a half annual rent steps. While the remaining 2 offer strong mark-to-market upside as their leases role.
This position's the asset to deliver nearly 6%, average annual noi growth over the next 5 years.
Strategically located in a high demand GTA North submarket where we already have a sizable half a million square foot portfolio. This acquisition is a strong complement to our Urban portfolio strategy.
The GTA North submarket has performed consistently well, with low availability, and strong barriers to entry due to high replacement costs.
The attractive bases on this Acquisitions. Can favor compares favorably to several inbound offers on our existing Assets in the area.
We remain focused on growing our private Ventures, as well, this quarter the dream some Adventure acquired, an asset in Oakville for 59 million. And we also recently entered entered into exclusivity on another opportunity and are actively underwriting additional deals.
On the development front, we are actively pursuing built to suit opportunities. Across our land Holdings and excess land portfolio.
And we have been adding scale to our solar program, both in Canada and in Europe, with 9 projects currently underway and over 80 projects in various stages of physical visibility.
With multiple gross drivers in place. The strengths of our portfolio as along with the conservative balance sheet positions as well to continue delivering resilient long-term organic growth and strong returns to our unit holders.
I will now turn it over to lennus to discuss our financial highlights.
Thank you Alex. Our business continues to deliver stable and consistent growth. We reported diluted ffo per unit of 26 Cents for the second quarter 4% higher than the prior year quarter.
The solid year-over-year growth was primarily driven by comparative properties. Noi, growth of 5% for the quarter led by 8% growth in Canada.
In addition, lease up of newly, completed developments and fee. Income generated from our property management. Platform contributed to our overall ffo growth.
Our net asset value at quarter end was $16.69 per unit which has remained fairly stable this year.
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 Q2 with leverage in our targeted range and net debt to ibida ratio of 8.2 times.
To date. We have effectively addressed approximately 70% of our 2025 debt maturities.
In July, we closed on the issuance of our million dollar 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 450 million maturity in December. And for General, trust purposes.
We continue to evaluate several refinancing options to address. The many remaining debt maturity balance and are currently observing rates in the low 4% range, in the Canadian unsecured Market with Euro, equivalent debt, 60 to 70 basis points, lower,
Including our recent $200 million Bond. Issuance we retain over 900 million in total. Available liquidity combined with the growing cash flow generated by the 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 second quarter performance, highlights the resilience of our business and we we remain confident in our growth trajectory for the balance of the year and into 2026.
We maintain the outlook for both 2025 comparative properties and why growth and ffo per unit growth. That was communicated in May
Over the past three years, we have grown our rents by over 9% compounded annually. While lower weighted average occupancy has offset some of this growth for the past nine quarters.
Despite the occupancy pressure, we have reported healthy organic growth. And when our Inn Place occupancy stabilizes, we expect the business to produce even stronger. Noi growth,
Our leasing commitments. At the end of the second quarter represent, 190 basis, points of additional occupancy, which is a leading indicator of future in place, occupancy upside.
Looking ahead, we continue to expect a strong pace of ffo per unit growth into 2026.
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 a transitory vacancies.
I will turn it back to Alex to wrap up.
Thank you lennis. We are encouraged by the results of the quarter and our optimistic. As to the outlook for dir our business has significant embedded growth. Drivers allowing us to continue delivering solid performance for our unit holders.
We will now open it up for questions.
Ladies and gentlemen, at this time, we'll begin the question and answer session.
to ask a question, you may press star and then 1 using a touchtone telephone telephone
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We'll pause for a moment as callers join the queue.
Our first question today comes from Mike maritus from BMO Capital markets. Please go ahead with your question.
Thanks operator, good morning everybody. Um, good to see The Return of solid leasing, uh, after that stutter step in February through May, um, just curious.
You know, and also good to see the increase in committed occupancy and let us keeping in mind your 190 basis point, spread comment, but definitely a forward leading indicator. So I guess, 2 questions from my front number 1, as we sort of progressed through the rest of this year. Um, do you think that that committed occupancy number can continue to inch higher, and then number 2, just in terms of the Cadence of narrowing that Gap, how should we be thinking of in place, occupancy, sort of in Q3 Q4 and into the beginning of 2026.
Thank you, Mike. Um,
The, at least we find definitely is uh, is active, uh, committed. Occupancy, is notoriously hard to predict given its uh, um, it's, it's really predicated on, uh, signing of Lisa's, um, but the pipeline remains healthy and generally speaking. Um,
Committed occupancy and in place occupancy, uh, historically for us have been very close, um, and, uh, this is probably 1 of The Wider gaps that we currently have. Uh,
In uh when compared compared to over the last, you know, 3-4 years.
Um, so we expect the gap between committed and placed occupancy to narrow over time, as ...
Signed leases, uh, uh, come into effect and, uh, as uh, the pipeline materializes. Um, we expect our overall occupancy to
Uh, to stay within the uh long-term uh averages of that mid mid, 90% range. Uh, where where we currently are is, um,
uh, we say in midpoint of our long-term averages,
Okay, so I guess by asking a different way. Um, if we look at the average occupancy, for the first half of this year, do you expect it to be the same in the second half or higher?
Well, exactly, in place. So to Trend, uh, higher, uh, overall, uh, in the second half, uh, and, uh, committed occupancy, uh, will likely, uh, Trend up as well. Uh, but it's it's hard to predict, uh, can the document, how, how much harder to predict.
Okay, thanks for that. I'll move on to the next 1. Um just the uh the North Toronto industrial, I guess the Staples Drive properties there. Um,
You know, attractive basis for the submarket. Um, looks like it's a strong noi growth profile. Could you maybe give us a little bit of color because if I just do the math it looks like maybe you guys are already in place at an 18th there. So, just trying to get a sense of where Mark, your fronts are for that.
so, that node
Yeah, the inputs that's actually are just to touch below 17 there. Um, um, the, um,
What what gets the uh, noi higher. There's strong ancillary income profile for the assets. Uh you know, fee income. Uh and some other ancillary Revenue. Um, that pushes the noi yield uh uh towards 6%.
And then uh, there's also some steps in place.
As as we commented.
asset, you know, so going into the JV and this asset um
Going on balance sheet at 100%.
Um,
so for this asset, uh,
What made it work on on balance sheet and the reason we wanted to pursue it on balance sheet is um, The Presence we have in the node. We uh, we think it's a strategic note for us. We already half a million square feet. Uh, right within that uh node node is not not, not just the GTA north of Market, we have more in the GTA North Market but within the original Hill node, we have already half million square feet and so
We are generally pursuing a, an assembly strategy with our Acquisitions, um, whether it's for our own balance sheet program or our private Ventures and uh, this was a strategic asset for, uh, for G to pursue. Uh, if you look at the map, uh, all of the assets that we have within dream, Summit are actually on the other side of the highway, uh, within uh, within the GTA north. Um, and more on the market side and dream Summit actually, it doesn't really have a meaning presence in, uh, in Richmond Hills. So it just made sense for for the IR to, uh, to look at it.
So approximately got it. Okay, um, and then just last 1 for me. If we think about all the sort of initiatives you got on the go in terms of solar, um, just uh, continued, expansions development, Etc. I mean, what should we be thinking about in terms of a annual capital investment for Dr. Excluding any ncib in? I guess just recurring leasing expenses on
A letter sustaining in nature.
Well, our solar program would quantify that. We we're working through about a hundred million dollar pipeline um over the next uh you know, 3 3 years and that pipeline could grow, uh there's a few uh few initiatives we're pursuing. Um,
In Canada, specifically, that might expand the pipeline. And if they do materialize, it could be a significant extension, because we're pursuing,
Uh, you know, more more distributed generation, uh, opportunities. Um,
But for now, we're working through our um, immediate Pipeline and uh on the bill to suit side. Uh, we we we're not looking to launch a lot of new spec uh projects except for perhaps 1 within our private Venture. Um, um,
still site that
we, uh, recently acquired, um,
built to suit opportunities will will materialize, uh, as we land the various requirements out there. And, uh, that is a bit harder to predict, in terms of how, how much Capital the there will be at any point in time, we will be updating the market. Obviously, as we, uh, enter into build to suit, uh, agreements.
Okay, great. Thanks for the, uh, thanks for the answers. I'll turn it back.
Our next question comes from Fred Blondo, from Green Street. Please go ahead with your question.
Thank you and uh good morning in terms of the same property and why in Europe I was wondering if you could uh give us a bit more color on what you're seeing so far in the uh, in the third quarter and I guess for for the remainder of the year.
Uh, thanks Brad. Um
What we seen on the same property in the wide side in Europe is, um, uh, our portfolio has delivered, a very strong results and, uh, you know, in 22, 23 early 24, where we've been, uh, delivering kind of double digit. Uh, same property in Hawaii, um, mostly on the back of, uh, uh, indexing. A lot of our leases, uh, to to CPI, which was, uh, which was kind of running, uh, higher in Europe. And, uh, uh, we've moved a lot of our in place rents, uh, quite materially in Europe with that.
So, the Gap to Market has narrowed a little bit, uh, although we're seeing continuous rental growth in Europe. Uh, so we expect that, uh, that Gap to Market will will widen again as that, uh, rental growth, uh, materializes. And so, from here on out for the next, uh, 12 months, we expect to see uh, some contribution from CPI and uh, and Lisa
Of, uh, their vacancies. Uh, we have, uh, some leases that we entered into that will commence in the first half of 206 so that will uh, contribute to the overall cpni and we expect it will be in the in, in the um, kind of low single digit range. So kind of that uh, 2 and a half to 3 and a half percent range for the next few quarters. Okay, got it. Thank you. And then I was, I was also wondering if you had an update on this uh potential European. GV you've been there contemplating
yeah, thank you for
Control, uh, um, Greenfield Venture, uh that's uh be a new program.
And uh, we uh, continue to be in dialogue with, with a number of, uh, investors uh, in addition to that. So, uh, the the JV that we're um,
Negotiating right now, um, is complimentary to uh, Central a few other programs. So uh, there's a, there's a few, uh, discussions that are taking place right now. Um, so we are we're pursuing and uh, at the same time um as with the deal in the in the Netherlands, we are recycling Capital within the region and looking to pursue uh, some some uh,
Talk in uh, acquisition opportunities, if you will.
Mhm. Okay, now that's totally fair. And lastly, in terms of the, uh, $100 million underly, what would be the timeline for those, uh, to close, and, uh, how do you intend to redeploy the capital? You briefly touched on it, uh, touched on it, Alex, but I was wondering if the NCIB is still on the table.
Um, yeah, ya know, very much is on the table Fred. Uh, the timing of dispositions uh, towards the second half of the year, we expect them to form up some that might close, uh, in the second half. Some of them might, uh, uh, firm up in the second half and then, uh, we'll we'll see closing in the, in the first quarter of 2026.
Um, uh, as far as redeploying, the capital, um, we continue to look at all opportunities in front of us whether it's proprietary intensification opportunities such as uh, intensification or solar projects. Uh, we obviously look at, uh, the the ncib as as uh, as possible, uh, destination for Capital, as well as, uh, some strategic, uh, Andor, uh,
Uh, highly, um, accretive acquisition opportunities.
Mhm, that's great. Thank you for the caller.
Thank you, Fred.
And our next question comes from Sam damiani from TD. Ken, please, go ahead with your question.
Thank you and good morning. Yeah, I'll just Echo a great to see the uptick in leasing activity this quarter. Um, first question, just on Market, rents, you know, they've held in pretty pretty steady over the last, uh, several quarters. While the in place, rent has ticked up, uh, really nicely with the contributing that noi growth. But the, you know, the mark to Market Gap, has narrowed a bit somewhat as a result and just wondering,
Alex, what's your view on? Sort of the evolution of Market rents in your major regions over the next, uh, year or 2?
Uh thank you Sam. Um Sam are you can you hear me, okay.
I can hear you fine. Okay, great. Um,
uh, so Evolution when it comes to evolution of Market rents as just commented in response to Fred's question, uh, we are seeing continued rental growth in Europe uh for uh, our infield and midday uh assets, uh, especially in the Netherlands and uh in Germany. Um, and uh, we generally maintain a constructive outlook on rental growth. Uh, there we expected that that will continue. It obviously doesn't come through every quarter, uh, every month. Uh, but uh, from what we experience and observe on the ground, uh, the uh pressure on rents is is ongoing. And we, we expect that we'll continue. Uh, especially given the absolute rent levels. Uh, in
In Continental Europe, uh, when it comes to Canadian markets, uh, we generally are continuing to observe, uh, moderate rental growth in in western Canada. So Calgary rents are, uh, experiencing uh, um, uh, some upward pressure already. Uh, and, uh, in the GTA and GMA we haven't seen rental growth so far as you know, uh, we disclose
Those, um, RV of Market rents in rmda every quarter. Um, and so, for the last few quarters now, we haven't seen rental growth in the GTA and GMA. Um, and we expect that we'll resume as the market, uh, sees the, uh, overall availability rate Trend, uh, Trend downwards. Uh, when, when we look at, um,
Of, uh, availability rates and vacancy rates, which are by the way, pretty healthy and uh, both Toronto and Montreal. So we expected as, um, uh, those metrics Trend, uh, Trend downwards and plateau, and Trend downwards will, will start seeing rental growth coming through, uh, in the GTA and GMA markets.
That's helpful. Thank you. And just, just on the the lease terms that you're seeing with the, with the increased volume, uh, is there any any change in in tenants, sort of desire for for shorter terms, more flexibility, or is this uptick in leasing volume or reflection of, you know, tenants looking looking looking to commit any longer yet?
Um, we're not really seeing any sort of material changes, uh, to, uh, to lease terms. Uh, we are continuing to pursue a whole range of, uh, lease terms from shorter term, uh,
2 to 3 years. Uh,
Uh, renewals or or in some cases, new deals to, uh, to a 10 year leases. So, um, the the range is, uh, consistent with what we've been seeing for the last couple of years. And, um,
Um, it it really is uh, uh, driven by Any Given occupiers, uh, uh, requirements and demands.
Um 1 1 important point to highlight on the lease terms though and that goes back to the rental growth. Uh question, uh,
is we continue to see healthy escalators in, uh,
In Canada, we are averaging...
At around 3 or north of 3 on our new leasing uh and renewals and uh that remains a consistent uh theme uh across the markets.
That's great. That's helpful, and I'll turn it back. Thank you.
Our next question comes from Brad. Sturgis from Raymond James. Please, go ahead with your question.
Hey, good morning. Um,
Maybe just a circle back to uh the the questions on dispositions the 100 million. Um speaking negotiation. Uh could you just remind me or or give a little bit of color around like the split between what would be sold through the wholly owned portfolio and through um
the the JB portfolio and then um any comments around um pricing expectations on let's say an exit cap rate, just given your comments around your certainty increased
Uh, Demand on on the buy side, just curious to to to know what that could translate from a pricing perspective.
Yeah, thank thanks for that that follow up, uh, the majority of the pipeline, uh, that we quoted the hundred million dollars. Uh, that's, uh, on balance sheet. Uh, we have a couple of assets there, uh, that are in the private Ventures. But, uh, they're they're not Material. We are looking at, uh, selective, uh, disposition opportunities within the private Ventures. And so, um, that that number might grow. Um, but the vast majority of the, uh, of of the dollars that we quoted are, um, on balance sheet when it comes to disposition pricing metrics. Uh, um, the pipeline is primarily comprised of 2, uh, categories of assets. They they would be non-strategic assets, uh, uh, in markets where we are not intending to grow. Um, for example, we sold, uh, uh, half of our Regina Holdings. Uh, last year and, uh, we regard the remaining Holdings in the market, as non-strategic. Um,
Again, we we differentiate uh, that from non-core, so we're not looking to just exit these assets at any price. We we really, uh, trying to maximize, uh, the proceeds and exit the uh these assets at an accretive price. Um uh from a cap rate perspective and uh overall total and Total return perspective.
So hence, the non strategic categorization, so that's 1 category of assets. And then the add category of assets would be more opportunistic, uh, sales where uh would like the assets and um, with regard to the Strategic otherwise, but with pricing we are getting, uh, is highly compelling. And then we are we, we are engaging with the prospective buyers and those buyers range from uh, local investors to uh, to users. Um,
uh, and uh,
The pricing metrics would be very different than, obviously, selling assets in Reina. So, um,
Last year, and some of our dispositions which was kind of sub 5, uh, market cap rates.
Okay, uh, that that's helpful. Um, in terms of just to maybe Circle back to the um,
GTA North acquisition sounds like there was a strategic reason why it's on balance sheet. I guess would
There is there any other opportunities to do more on balance sheets? Uh, Acquisitions through the holy on portfolio, or should this be more of a, you know, viewed as a opportunity, opportunistic, 1-off deal. That just made sense, uh, to pursue it this way, versus the, you know, the summit GB.
Thanks for the follow up, uh,
Yeah, there will be opportunities over time. Uh, we we are looking at a, at a, at a, at a few, uh, opportunities across uh, across Canada, uh, and uh, obviously your app. Uh, so there will be opportunities over time, but, uh, the bar is high for us to acquire on balance sheet. Uh, uh, we want to make sure that the assets is either very strategic or offers very compelling returns. Um, given the uh, various Alternatives that we have for Capital allocation uh, that we discussed.
Uh, last question. Just
Um on the ball doc projects in terms of the 300,000 square feet. Maybe I missed it in your Preamble but just the timing potentially of those leases commencing in terms of occupancy. If if everything's executed
Um, the leases in that we signed. So I just 160,000 square feet of leases, that we signed will commence in the fourth quarter and then leases that are in the pipeline will be, uh, will be looking at commencement in, uh, q1, uh,
Q1 early Q2 206.
Thank you.
And our next question comes from hanchu, Gupta from Scotia Bank, please go ahead with your question.
Thank you and good morning.
Uh, so on the Richmond Hill acquisition, uh,
Just wondering you know, how competitive is the acquisition market today and uh, you know, do you think institutional capital is net buyer or net seller in the current market? You know, given the Tariff uncertainty
Uh, thanks for following up, in Manu. Um, generally speaking, we are observing uh the acquisition Market uh to be heating up. Uh we're seeing more uh, Capital out there uh for uh, marketed deals. Um,
We generally seeing uh pricing uh pressure uh upwards pricing pressure on in terms of capital value. Uh downwards pricing pressure on on cap rates. Um
And, um, I would say that generally speaking we, we, we're seeing, uh, institutions being more net buyers and net sellers, uh, um, based based on these emerging patterns, uh, when it comes to the Richmond Hill acquisition, it was a narrowly marketed, uh, deal. Uh, which we tied up, uh, uh, quite a few months ago. Now, when we've been, uh, working directly with the vendor for, uh,
for some period of time.
Okay, thank you. Uh, and then, if I look at the pricing, you know, like $300 per foot, uh, quality $18 range. Uh,
Does this justify like new construction? I mean, do you think at this price, the math works for back in increase in consistent starts at this price.
From our perspective. It doesn't uh we we think uh uh we we estimate replacement costs for this asset, to be a kind of in the mid 300s uh per per foot range. Uh, 1 thing you need to take into account is that this is not a
Large Bay asset. This is
A small to Mid mid Bay facility multi-tenant, uh, and that that that is expensive to build. Uh, this node, uh, still has uh, very expensive, uh, relatively expensive land uh, if you can find it. So uh, Replacements costs are higher uh, generally speaking uh at mid-30s uh a foot. We we're not really seeing uh new construction making sense uh given
What we are targeting on our uh on our spec development program is is at around 7%, uh yield on cost and the current length, rent levels, don't quite get us there.
And that's one of the reasons why we're seeing new construction starts declining and the overall construction pipeline in the market, like the GTA, shrinking.
25 guidance ffo. Uh, is it simpler to what you mentioned on the last call? Like mid single digits on ffo growth in this year.
So there's been no change in our outlook on for ffo per unit. Um, I think we had mentioned that it would come in in and around the lower end of that, the pre previous range that was communicated.
Okay. And then, in your guidance, that $250 million debenture is still remaining. Are you assuming it gets done like now, or should we assume the impact is mostly in 2026? The $250 million which is still remaining to be done?
Yeah, so that's maturing in December. Um we the most of the impact will be in 2026. There might be 1 month impact in our, in our estimates for 2025
Okay. Uh, I mean, I, I was asking basically, will there be a chance of early repayment as you were saying, you know, your uh, exploring various? That financing opportunities? Yes. I mean it's potentially. There could be um given its later in the year and uh depending on where we would look to transact. It would have pretty nominal impact on the uh, the remainder of your outlook for 2025
Okay and then, you know, euro is turning to be stronger than probably, what you guys would have thought of uh, is that helping, is there an upside case to the guidance? Or you think that the impact is already being reflected in your guidance? Now,
Reflect.
Slightly Below in terms of of that, that, uh, the levels of Euro. Um, there's there's also the USB and US dollar impact, which is a smaller impact. Um, but that's where in and around current levels.
Okay, thank you everyone and I'll turn it back.
Our next question comes from Kyle Stanley from Dejar Dan. Please go ahead with your question.
Thanks, good morning everyone. Just going back to the JV, uh, European JV commentary from earlier. You mentioned dialogue with a few other investors in addition to that Greenfield Venture. Would you consider vending in some of your on-balance sheet assets as well as part of a potential JV?
Uh, thanks Kyle. Uh, yeah, we we would consider it that obviously the right price and uh, the right metrics. Uh, we generally would would be open to uh, some conversation like that.
Okay, thank you. And I think last quarter you highlighted um, potential of, you know, maybe just over 300 million of of, uh, dispositions within the portfolio. Obviously, you you've got roughly 100 million under Loi. Um, do you see the opportunity for that 100 million to, to expand towards that? Maybe 300 million number that you would discussed last quarter or um, maybe how is that evolving?
Uh there we very much do uh generally speaking the the this position pipeline is is larger than the 100 million dollars. We co um 100 million dollars is more of a more more advanced uh in terms of uh uh Louis or PSAs being in place.
Okay, thanks for that. And uh, maybe just 1 more.
Maybe 2 pieces here. But just your your kind of conversations, with, with tenants on leasing over the last little while. So, you know, clearly there's been a lot of volatility in in kind of trade negotiation, just curious. Um, you know how much that is impacting or or you know, delaying or pulling forward activity? You know, there was an expectation, maybe there would be a deal in place in Canada, between Canada and the US by July 21st and then obviously that was pushed out to the second. And you know, we kind of still sit here somewhat limbo today. So I'm just curious, you know how how much um are you seeing maybe RFP activity?
Pick up in advance of a potential, you know, positive outcome and then maybe adjust given what's actually happening in the market. Just trying to understand how tenants are thinking here.
Was decisions. Um, well, we are continuing to see is that the conversion timelines are longer, um, from uh, an initial, uh, inquiry to assign lease those those timelines are longer. Uh, they are compensated by the overall size of the pipeline, uh, that is, uh, that is continuing to build. And hopefully, as these decision timelines, uh, compress, uh, we'll just see, um, stronger pace of, uh, even stronger Pace at least saying, uh, velocity,
Okay, that makes sense. And I mean the the kind of follow up to that, which I, I'm assuming the answer would be quite similar, but you don't see necessarily a risk that, um, you know, as we push into 2026 and maybe we approach the usmca renegotiation, that, um, there would be any real change to to end use or demand for space. Um, you know, just expectation that what we're seeing this year is probably consistently with what you could see next year.
Um, it it's obviously is a very Dynamic situation. It's hard to hard to predict, well, we are observing. Is that the, again, the occupiers who are in the market today, are moving forward with their requirements, uh, with the
Full appreciation of, uh, ongoing uncertainty regarding trade.
Um, there are occupiers who are not in the market yet, who let's say were in the market for a new space, in the fourth quarter of 24 and are not yet back, uh, because of the, uh, continuing uncertainty. So um, if the environment becomes certain, we expect that, that would be net positive. If their environment becomes worse, you know, that might be neutral to slightly negative. Um uh, but it's it it is a dynamic dynamic situation.
Yeah, fair enough. I appreciate how difficult it is to to forecast this. Um that's it for me. I'll turn it back. Thanks.
Our next question comes from Mark Rothschild from canaccord. Please go ahead with your question.
Thanks. Uh, maybe just one for me. Um, this is following up partially on a question from Fred, but also your comments, Alex, in regards to the unit buyback. Um, it is understood from your words that it was more reflective of maybe just a surprisingly large dip in the market, um, not so long ago that you bought back units. Is that a fair way to interpret your words as far as capital allocation between buybacks and putting money to other uses, such as development or acquisitions?
um, well certainly uh, when it comes to, um,
The capital allocation priorities in front of us or capital allocation opportunities in front of us. Um,
At a certain unit price, the Buybacks rise to the very top of the list. Uh, and, uh, that informed, uh, the May, uh, Buybacks. Uh, they remain on the list. And, uh, we look at, uh, all the opportunities in front of us, um, relative to the capital that we have, uh, and, uh, evaluate each one of them again. Buybacks is not, uh, a risk-free undertaking from our perspective, and, uh, we want to make sure that we're pursuing a balanced approach.
Just following up on that. Is there any way you can maybe quantify for us how you look at the buybacks as far as the return that's needed and compared to the return that you would get on acquisitions?
Um, we were looking at the overall total return. We were looking at the leverage-adjusted total return. And then, uh, um,
We, you know, with in the case of an acquisition that you, you're acquiring a liquid asset. In the case of a buyback, you are actually shrinking the liquidity pools. So you you try to, uh, layer on, uh, some uh, opportunity costs, uh, uh, uh, uh, when evaluating when evaluating BuyBacks, there's no absolute.
Levels. If, if that makes sense, it's all relative based on the kind of capital availability and, uh, the, uh, the opportunities that we have at, at that time,
Okay, thank you so much.
Thank you.
Our next question comes from Matt.
Cornack from National Bank, please go ahead with your question.
To what would have shifted their?
Um, there was a larger renewal that we completed last year uh that kicked in this year and uh that renewal is not fully in the numbers. So that there's uh there's a little bit more uh, contribution from it in the coming quarters. Um, when it comes to leasing activity, uh, generally we've observed a bit of a pickup in Montreal, uh,
In the second quarter. Um, when it comes comes to, um, smaller to mid-size Footprints. So, uh, 30 to 50,000 square foot Footprints. Uh, we've seen, uh, uh, pretty healthy volume of, uh, leasing activity. Uh, we continuing to see slower leasing activity for larger Footprints. So, 100, 150 thousand square feet plus is is still slower. Uh, fortunately, though most of our portfolio is, uh, dimmable, um, into smaller units. So we we remain pretty, uh, pretty active. Uh, when it comes to our new leasing pipeline in Montreal.
And you mentioned that the tenant occupying that 35% is a tenant that you have in the European portfolio. Did the discussions come through the property that you have in Europe, or was it just completely coincidental?
Uh, it wasn't coincidence at all, uh, the sort of highlights the benefit of scale and uh, a global footprint. Um, this is an occupier that we have in the Netherlands. It's actually a Canadian company, uh, but we, we didn't have them on our Canadian portfolio. We recently, uh, uh, completed a bill to suit expansion for them, uh, in the Netherlands and, uh, uh, that relationship, uh, led to uh, this, uh expansion in, in Montreal with us.
Interesting. Um, and last one for me. Leasing cuts did pick up in the quarter, but you seem to have done more volume. Is that just a volume issue, or is there also kind of a bit of incremental creep on leasing costs given the state of the market?
Uh it's definitely the volume and that that large Quebec deal that commenced this quarter is part of that that's a pathan square foot renewal that we completed last year. Uh, so that's uh that's part of it.
Okay, great. Thanks for the call.
Our next question comes from Pammy beer from RBC Capital markets. Please go ahead with your question.
Thanks for the, uh, the call around leasing. But maybe just getting a little bit more granular. Can you talk a little bit about where you are seeing, like, what are some of the tenant segments where you've seen a pickup in the activity versus, Alex? You did mention that, you know, some tenants are still holding back or delayed, but just curious if you could provide a bit more context on the ones that are moving forward.
Well, the, I mean, just to follow up on the, uh, tenants who are, um, uh, delayed. We've seen, uh, lots of occupiers in the market and the force quarter, uh, of 2024, uh, looking for new, uh, facilities, uh, across across the Canadian footprint. And some of these occupiers, uh, are still on, on hold, uh, following the kind of the, the trade, um, uh, Dynamic escalating. Um, they, they're not yet back to the market, so, which, which is from our perspective helpful, because, uh, we've seen a, a pretty healthy pickup and leasing activity already. And that's, without some of the these, uh, requirements, uh, uh, participating in in that activity, if you will, when it comes to, uh, tenant categories that are active, uh, we've seen, um, 3pls, uh, pretty active.
um, and uh,
that's primarily driven by, um, many end. Users rethinking their supply chains and uh, 3pls is a is an easy way for many of them to address the, the changes to their supply chains. And, uh, we've seen quite a bit of activity from, uh, uh, 3pl, uh, groups. Uh, we've seen food and beverage, uh, uh, pretty active, uh, across our portfolio. Um, to maybe surprising to for, for some listeners. Uh, we've seen, uh, very healthy volumes from Automotive groups. Um, and, um,
Groups as well.
Okay, got it that's uh that's helpful just um maybe Switching gears to Europe. Um the in place documents, he did drop from from q1 but the committed is uh in pretty good shape. So just curious was that drop. I think you'd mentioned there was a couple hundred thousand square feet in Germany last quarter. Um, that was not going to renew in Q2, was it mainly that or were there some other factors there as well?
There. There's that. That's 200,000 square feet. Uh, we have good pipeline, uh, for that asset, uh, with a couple of groups, uh, engaging with us. Uh, there's also, uh, uh, 1 more, uh, deal in France, where we are. Uh, uh, we we we renewed being placed tenant.
Uh, but we are pursuing uh, someone of extensive refurbishment for them, uh, including building. Um,
Uh, solar panels over a car park and refurbishing the space for them. That's about 100,000 square feet. Uh, so that, uh, got committed, uh, this quarter. Uh, but uh, they will be not occupying, the space during construction and so they'll, uh, reoccupy the space and, uh, early 2026.
Okay. Um, last 1 for me, I think you'd previously indicated that for for 2026 that um, you you, you expected same property in the info growth to sort of replicate the levels that you expected to hit in 2025. I know you're not providing guidance but, you know, has your has your thinking or your view changed at all. Um, based on what uh, maybe what's happened thus far this year?
Uh, no, it hasn't. As Glenn commented in her prepared remarks, our outlook for 2026 remains generally intact.
Great. Thanks very much. I'll turn it back.
Thank you, pami.
Once again, if you would like to ask a question, please press star and then 1 to withdraw your questions. You may press star and 2.
Our next question comes from Tallwood Leaf from CIBC Capital Markets. Please go ahead with your question.
Hi, good morning. Um, I believe the Euro is at a 15-year high relative to the Canadian dollar.
Um, you know, and you've been talking about how indexation increases and stuff like that on rent are, you know, slower than they have been in the past. I'm just wondering, like, has there been any thought to maybe crystallizing some of that value in Europe and then redeploying the proceeds elsewhere, into other regions where the returns are maybe more attractive, or even your own stock?
Um, well we we are recycling capital in within Europe. We've sold some assets earlier this year. Uh, and uh uh redeployed uh, into our pipeline uh which uh
Is, is generally across our, uh, footprint. Um, as far as, uh, monetizing a larger component of the portfolio, uh, driven by uh, exchange rates. Uh, generally, this is not, uh, something that we are.
uh,
Kind of thinking about we are thinking about more from an asset perspective as opposed to currency. Um, and obviously, our European cash flow is then translating into a higher contribution to our.
Uh, our overall results.
Okay, and then in development, we've got here in Canada, we've obviously seen it start to slow. Do you feel like that's a function of...
Cost to build is too high, or just the industry is slowing because they see availability rising.
It, it's, uh, it's a combination of factors from our perspective. It's, uh, the costs are still elevated. Uh, um, but more importantly, the overall costs, uh, and that includes land, uh, construction costs development charges.
All right, effectively, not high enough. Uh, relative to rents, uh, you're not really solving to uh, attractive enough yields on cost, uh, to pursue new projects on spec.
Um and uh you know obviously we've seen uh Rising availability rate in the in in some Canadian markets and so that that is informing. Perhaps just the the risk uh component of the equation for uh some Developers
Okay. Thanks very much, everyone.
Thank you.
And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Mr. Sackhoff for closing comments.
Goodbye.
This brings to a close today's conference call. You may now disconnect your lines. We thank you for participating, and have a pleasant day.