Dream Industrial REIT Q3 2026 Earnings Call Transcript

Dream Industrial REIT (TSX:DIR) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Dream Industrial REIT reported a 3.7% increase in FFO to $0.28 per unit, driven by 8.5% year-over-year NOI growth despite higher refinancing costs.

The company completed $569 million in acquisitions, adding 2.7 million square feet of space, and entered the UK market with the Chancery Gate transaction.

Dream Industrial REIT is focused on maintaining liquidity, asset quality and capital recycling, with plans to deleverage organically as developments stabilize.

Leasing activity remains strong, with significant spread increases in Ontario and Quebec contributing to a 95.5% occupancy rate.

Management expressed cautious optimism about the future, expecting continued growth in same-property NOI and FFO despite macroeconomic uncertainties.

Full Transcript

OPERATOR

Welcome to the Dream Industrial REIT third quarter conference call for Wednesday, November 4, 2026. 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 question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star 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.

Additional information about these assumptions, risks, and uncertainties is contained in Dream Industrial REIT’s filings with securities regulators, including its latest Annual Information Form and MD&A. These filings are also available on Dream Industrial REIT’s website and at www.dreamindustrialreit.ca. Your host for today will be Mr. Alexander Sannikov, CEO of Dream Industrial REIT. Mr. Sannikov, please proceed.

Alexander Sannikov (President & CEO)

Thank you. Good morning, everyone. Thank you for joining us today for Dream Industrial REIT’s third quarter 2026 conference call. Here with me today is Gord Wadley, our Chief Operating Officer, and Lennis Kwon, our Chief Financial Officer. We delivered another quarter of solid operating and financial results in line with our expectations for the quarter. We delivered 8.5% year-over-year comparative properties NOI growth driven by healthy leasing activity and strong rental spreads, particularly in Canada. This organic growth drove FFO to $0.28 per unit, 3.7% higher than prior year, and that is as we continue to absorb the impact of refinancing of our debt at higher interest rates.

The macro backdrop has become more volatile since we last reported our results. Long-term interest rates rose sharply over the second half of the quarter, and the trade environment between Canada and the U.S. remains uncertain. That said, we have been generally pleased with the level of leasing activity and the pace of absorption in Canada over the past few months. In Europe, occupier markets are performing well, with continued rental growth in the UK and stronger-than-expected occupier activity in many continental European markets.

In this environment, we believe a measured approach is prudent. We’re generally staying the course with strong focus on liquidity, asset quality, and capital recycling. We’re also looking to continue to deleverage organically as our developments stabilize and our NOI continues to grow. We started the year with significant liquidity and have made solid progress on redeploying the proceeds from the initial portfolio sale to the DCI venture with CPP Investments.

Since the beginning of the year, we have completed $569 million of acquisitions across our wholly owned portfolio. This added over 2.7 million square feet of urban, small and mid-bay assets in Canada and Europe, along with five development sites that will add approximately 0.5 million square feet upon completion. Excluding the Chancery Gate assets, these acquisitions were completed at a going-in yield of approximately 6% and a mark-to-market yield of approximately 7%.

In August, we closed the Chancery Gate transaction, marking our entry into the UK multi-let industrial sector. Early progress on that portfolio has been encouraging. Leasing at the development projects is tracking in line with our plan, and we expect an unlevered yield on cost of approximately 8% on the wholly owned project upon stabilization. The Chancery Gate transaction adds development expertise in the UK to our platform, and we are seeing a strong pipeline of opportunities for small to mid-bay developments at an unlevered yield on cost in the 7 to 7.5% range.

A private venture strategy is a key differentiator for our business this quarter. The Dream Summit JV acquired a 15-building, 1.5 million square foot portfolio in Edmonton, and subsequent to quarter end, the DCI JV acquired a 2.1 million square foot portfolio of high-quality logistics assets in the GTA. The combined purchase price of these acquisitions was just over $800 million and represented a going-in cap rate of approximately 6% with upside as we mark leases to market.

This activity is adding meaningful scale to our property management and leasing platform. We expect our net property management margin to exceed $16 million annually on a run-rate basis by year end 2026, or 40% growth compared to 2025. The new continental European venture we discussed last quarter is progressing well. We are advancing the documentation and have started to source investment opportunities. DIR is expected to provide property management and leasing services to the venture in Germany and the Netherlands.

We’re starting to see early results of our power procurement strategy across multiple sites in our portfolio. We have made meaningful progress on two sites this quarter. We’re currently in advanced negotiations of binding commitments for near-term power delivery for approximately 100 megawatts. Just under 50% of this capacity is for a site in one of our private ventures and the remainder is related to a wholly owned property, with greater visibility into contractual terms and delivery timelines.

We’re currently marketing the sites to users with a focus on powered shell delivery. Overall, our results this quarter demonstrate the resilience of our business, and we remain focused on disciplined execution of our strategy. With that, I will now turn it over to Gord to discuss our operational highlights.

Gord Wadley (Chief Operating Officer)

Thank you, Alex. Occupier markets are showing strong resilience, and fundamentals are generally improving across our markets. Western Canada stands out with vacancy at record lows and observable rental rate growth. In the GTA, net absorption run rate has been solid and above pre-COVID average, and incentives have been trending lower. Combined with limited supply expected to be delivered over the next 12 months, there is growing evidence of rental rates starting to increase again in the near term, especially for small bay assets and for new stock.

In Montreal, we are seeing early signs of recovery in big-box demand, and the small to mid-bay segment remains resilient. Over in Europe, small to mid-bay fundamentals remain strong, with healthy absorption and rent growth in the UK and the Netherlands. We are also seeing meaningful rent growth in Spain and certain markets in Germany, along with renewed occupier demand for large pockets of space. In Germany, we recently completed the lease-up of a 250,000 square foot vacancy, with the lease expected to commence in December 2026. The French big-box market has been relatively soft, but our portfolio there is essentially fully leased.

While higher energy prices are driving inflation expectations upward, over 85% of our European portfolio is indexed to CPI, which allows for rents to increase in line with inflation. We’ve already seen this play out during periods of rising inflation in 2022-2023 when in-place rents across our European portfolio were increasing in the low double-digit range in line with inflation. Moving over to our leasing results, since the beginning of the year through the end of October, we have transacted 4.6 million square feet of leases across our wholly owned portfolio at a weighted average spread of 22.9%, including 1.7 million square feet of new leasing across our broader platform. Including our private ventures, we’ve executed on approximately 8.1 million square feet of leasing since the start of the third quarter. We have transacted nearly 1.6 million square feet across the wholly owned portfolio at a weighted average spread of 32.4%, led by spreads of 59% in Ontario and 55% in Quebec.

In Canada, these deals include average annual contractual rent steps of approximately 3%. As an example, in Quebec we backfilled 181,000 square feet through an early termination with a new four-year lease at more than double the previous rents with no downtime. As many of you have seen in the news, one of our tenants in Quebec is under CCAA protection. The business is continuing to operate, and we are in close contact with the occupier. We are seeing encouraging signs that they will continue to operate. That said, our downside risk is well protected. The asset has several valuable attributes, including high power capacity, and we’ve seen buildings with existing automotive manufacturing capacity attracting significant interest from automotive and defense users across Canada and Europe.

Leasing economics remain disciplined. Lease incentives across our markets continue to come down from the elevated levels we saw in 2025. This trend is strongest in Calgary and is starting to take shape in the GTA as surplus availability is absorbed. We expect incentives to normalize further, supporting net effective rents and ultimately face rents in Canada. In-place occupancy was 95.5% at quarter end, 200 basis points higher than a year ago. This was driven by leasing in Quebec and recently completed development in Alberta.

Occupancy was down slightly from last quarter, primarily due to an anticipated tenant departure from a 100,000 square foot building in the GTA, where we are evaluating both leasing and user sale options. We expect to achieve approximately 100% releasing spreads on this asset. Regionally, Western Canada led the way with comparative properties NOI growth of 19.8%, driven by strong rental spreads and higher occupancy. Quebec grew 17.6% on the back of renewal spreads and new leasing, and Ontario grew 6% with higher in-place rents partly offset by lower occupancy following the lease expiry in southwestern Ontario.

Leasing momentum across our development portfolio has picked up considerably across our broader industrial portfolio as large bay occupiers continue to upgrade into newer space, notably at our Whitby redevelopment in the GTA. The project is now approximately 50% leased, with a further 33% under conditional lease agreements, and we are in advanced negotiations for the remainder of the space to bring the project to full occupancy. Overall, our leasing pipeline remains healthy.

We are encouraged by the stable market fundamentals and the trajectory of the portfolio heading into 2027. I will now turn it over to Lennis to discuss our financial highlights.

Meaghan Peloso (Chief Financial Officer)

Thank you, Gord. Our portfolio delivered comparative properties NOI growth of 8.5% for the quarter and year to date, led by 11.9% growth in our Canadian portfolio and 4.5% growth in Europe. This organic growth along with FFO and property management income from our private ventures development lease-up and contributions from acquisitions drove diluted FFO per unit of $0.28 for the third quarter, 3.8% higher than the prior year quarter and $0.81 year to date, up 4.6%.

These factors more than offset the impact of refinancing approximately $400 million of debt over the past 12 months at rates approximately 260 basis points higher, as well as the timing of capital redeployment. Net property management and other income was $3.3 million for the quarter, up 29% year over year, reflecting the growing scale of our private venture business. Our net asset value at quarter end was $16.80 per unit, up from $16.76 last quarter, with investment property values largely stable. Fair value adjustments this quarter primarily reflected transaction costs on acquisitions.

Subsequent to the quarter we issued $300 million of Series I unsecured debentures maturing in August 2030. We swapped the proceeds to euros, fixing the interest rate for two thirds of the proceeds, achieving an average rate of 4.05% currently on the total swapped proceeds. Net proceeds were used to partially repay our revolver. Pro forma this Series I issuance, our liquidity is approximately $640 million. This positions us well to address our remaining 2026 maturity.

The $250 million Series D debenture is due in December and to fund our development and solar programs. We ended the quarter with leverage of 38.5% and net debt to EBITDA of 7.3 times. We expect leverage to remain in the high 30% range and net debt to EBITDA in the mid 7 times range, trending lower as our near-term developments, including the Chancery Gate projects, stabilize. Our FFO payout ratio was 64.3% this quarter. Our 2.5% distribution increase took effect with the September 15th distribution, bringing the annualized rate to 71.75 cents per unit.

Our year to date results are in line with our plan and we are reiterating our full year outlook. For the full year 2026 we expect average in-place occupancy to be above 94% with year to date comparative properties NOI growth of 8.5%. We expect full year growth on the higher end of the 7% to 8% range that we previously discussed. We continue to expect full year FFO per unit to be slightly above the midpoint of our previously communicated $8 to $10 range.

As always, our outlook is predicated on current foreign exchange rates and interest rate expectations. I will turn it back to Alex to wrap up.

Alexander Sannikov (President & CEO)

Thank you, Linus. Dream Industrial REIT’s business is anchored by a functional, high-quality urban portfolio, a diverse occupier base and a growing private ventures platform that provides access to meaningful growth capital. While the macro environment has become more uncertain, our results this quarter highlight the strength of our business. We remain focused on disciplined allocation of capital, maintaining a strong balance sheet and compounding cash flows per unit for our unitholders.

We will now open it up for questions.

OPERATOR

We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad to acknowledge your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your questions, please press star one again. We will now pause for a moment as the callers join the queue. Your first question comes from the line of Sam Damiani with TD Cowen.

Sam Damiani (Analyst)

Hey, Katie. Good morning, everyone.

Katie

Morning, Sam.

Sam Damiani (Analyst)

Alex. Good morning. Alex, you mentioned the capital recycling that’s been significant since the DCIJV was created. Just wondering if you comment on, I guess, how the redeployment returns have met versus your initial expectations and as a follow up, your outlook for, you know, continuing to recycle capital given that leverage today is kind of at the top end of the range that you’re or at least of the target range that you have. Thank you.

Alexander Sannikov (President & CEO)

Thank you, Sam. So the returns on the redeployment assets have been generally in line, slightly exceeded our expectations, slightly exceeded our plan, both in terms of the going-in cap rate and the growth trajectory that these assets have built in in terms of existing mark to market before we factor in any prospects for rental growth. So we’re encouraged by that, encouraged by the pipeline that we sourced. We are largely through redeploying the proceeds, as Sami pointed out, and we’ll look for leverage to generally continue trending lower on a debt to EBITDA basis.

As you know, LTV is much harder to control. Debt to EBITDA is something we can control and we’re kind of measuring that metric. Primarily we would want to continue deleveraging organically over time.

Sam Damiani (Analyst)

Sorry. And so the opportunity to continue to stay active in the transaction market would I guess require some dispositions or receiving another JV. Is that something that you see happening in a meaningful way in the year ahead as it has been in the last year?

Alexander Sannikov (President & CEO)

Probably not to the same magnitude. We don’t have anything that is contemplated of the same magnitude. We’re always looking for recycling opportunities and for example, we’re in a number of discussions for individual asset sales at compelling prices to users, to strategic buyers and where we can reinvest that capital accretively. So we will continue pursuing that as we have in 25 and obviously to a much larger degree in 26. So that will remain a key element of our strategy.

In addition to that, in terms of growth capital, we obviously have access to co-investing with our partners in our private ventures and that is a growth avenue that we’ll pursue throughout the remainder of 26 and into 27. And we have a good free cash flow profile to fund that even if recycling doesn’t come through.

Sam Damiani (Analyst)

Okay, great. And last one for me just on the I know you’re not giving 2027 guidance yet, but just when we look at the mark to market on the portfolio, you know, with market rents have come off a little bit over the last year and your in-place rents have grown quite nicely. So the embedded sort of mark to market, you know, has shrunk considerably over the last year and indeed over the last four years. How do you think about that flowing into your leasing spreads in the coming quarters and ultimately seeing property NOI growth, you know, to what extent will that decelerate your growth from that sort of 7–8 this year to perhaps something less in the coming years?

Alexander Sannikov (President & CEO)

Thanks for that follow-up, Sam. Look, we generally are encouraged by the same property NOI trajectory in 28. There are multiple ingredients that inform same property NOI growth. Obviously leasing spread is one of them. But then we have pretty robust escalators. We have room to move occupancy up and we’re generally seeing that the spreads on re-leasing are going to be positive in 27 and vast majority of leases in 28 have positive re-leasing spreads as well.

So we’re pretty encouraged in terms of the profile. We’re not going to comment maybe today in terms of the absolute levels, but general trajectory is intact. In addition, as Gord commented, we are seeing rental growth coming through again. It’s not an inflection point anymore. We actually are seeing rents growing, not in every market, but certainly Alberta is leading the way in that regard. We’re seeing rental growth coming through for small bay assets across Canada, certainly seeing pockets of rental growth in Europe. So we don’t expect that market rents will remain static throughout 27 and 28.

Sam Damiani (Analyst)

Okay, that’s great. Thanks so much. I’ll turn it back.

OPERATOR

Your next question is from Brad Sturges with Raymond James.

Brad Sturges (Analyst)

Hey, good morning, Alex. Just following up on that question, I guess what would you be seeing today for market rents in Toronto, Montreal or what would be your expectations for next year?

Alexander Sannikov (President & CEO)

In Toronto, Montreal, what we’re seeing is pockets of rental growth. So we’re seeing rental growth in small bay assets and we’re also seeing rental growth or expectation of rental growth building for brand new larger box where we’ve seen sort of that migration of occupier base towards newer stock. There’s not a lot of it, but we’re starting to see repricing of that taking place. So those are the two pockets of rental growth that we’re seeing right now in the GTA.

In a market like Calgary and Edmonton, we’re seeing rental growth being a bit more broad-based.

Brad Sturges (Analyst)

Okay, that’s helpful. And just I guess you’ve seen encouraging signs in your own portfolio in terms of absorption and that’s been validated by reporting by CBRE. What trends is that trend continuing to Q4, I guess. What are you seeing in terms of new RFP activity in the last month or two across your major markets?

Alexander Sannikov (President & CEO)

We generally are encouraged by RFP activity, it has been strong September and October so far, and we’re generally not seeing signs of it slowing down. Our new stock is doing well. We’re seeing more inquiries for existing larger bay pockets, most of which are in our private ventures, not in DIR. For maybe older stock, we start seeing signs of that happening. So generally encouraged by the leasing activity, we’re virtually full in Western Canada and to a point where we’re probably going to look for a bit more vacancy opportunities to drive rents further.

And as Gord said, there’s some larger pockets of absorption that are taking place in Europe. So we just signed a relatively large deal in Germany late last week. So that’s going to be additive to our occupancy profile in Europe. And there’s a couple of vacancy pockets in Spain that are seeing good activity as well.

Brad Sturges (Analyst)

And in terms of the RFP activity you’re seeing that, you know, is there anything noteworthy from the type of user, whether it’s manufacturing or defense logistics, or is it more of a broad-based sort of activity level right now?

Gord Wadley (Chief Operating Officer)

Hey Brad, it’s Gord. You kind of answered your own question there. It is predominantly those three groups we’re seeing: defense, manufacturing. Predominantly the manufacturing space is interesting because we’re seeing a lot of kind of larger-cap manufacturing groups try to go over some of these distressed groups. The benefit of taking over manufacturing space is there’s a lot of in-place equipment and things that aren’t cheap to replace. So there’s a lot of groups that are trying to be opportunistic in this space.

And then where we’re seeing the most activity is Asian 3PLs throughout the portfolio and that’s in every market. There seems to be a robust demand for Chinese 3PLs in Quebec, Toronto, and we’re seeing some migrate as far as Western Canada as well. So those are the three spaces where we’re seeing quite a bit. And then government spending, especially around defense and Shared Services, which is their IT department, there seems to be a bit of an insatiable appetite for spaces that are equipped with power.

Brad Sturges (Analyst)

Great, I appreciate that. I’ll turn it back. Thank you.

OPERATOR

Thank you, Brad. Your next question is from Kyle Stanley with Fish Jordan, please go ahead.

Kyle Stanley (Analyst)

Thanks. Morning everyone. I think you gave some good color on a bit of the vacancy that we saw this quarter in Ontario, you know, the retention rate, I should say, looking for your thoughts on maybe where retention trends going forward. You know, is it safe to assume closer to that kind of 70% historical level? And then I think you mentioned targeting year-end occupancy, you know, in line with previous disclosure which would have suggested maybe somewhere in the 94% range.

Wondering how that trends into 27 where you see the upside there.

Alexander Sannikov (President & CEO)

Thanks, Kyle. What we’re seeing is the retention ratio hovers at around the long-term average. We’re not expecting to see any meaningful spikes in retention. We have seen that in, call it, ’23, ’24. We expect that retention will be drifting towards the long-term average of 70 to 75% over the next couple of years. As you know, retention is a metric that is best measured over large samples, so any given year or any given quarter, things can fluctuate. When it comes to occupancy trends, we would generally expect that occupancy has room to move up to, kind of, maybe the upper end of our long-term average range of, call it, 90, 95, 96%. You know, it’s not going to happen immediately in, let’s say, early ’27, but there’s definitely room to move that up.

Kyle Stanley (Analyst)

Okay, thank you. You know, as we think about, kind of, the capital recycling that you’ve been doing, can you talk about what the buyer environment is like today? Are you seeing more demand for your assets today versus 12 months ago? Who would those buyers be and what could be changing that demand profile that you’re seeing in the market for your assets?

Alexander Sannikov (President & CEO)

What we see out there is the industrial asset class continues to be pretty favored by investors. And so you see there’s lots of large-profile capital formation announcements both in Canada and Europe, when new JVs form, new pockets of capital partnering with operators to look for industrial opportunities or recapitalizing existing industrial portfolios. So we continue to see that trend, and then that capital gets deployed—especially the capital that targets programmatic deployment—that’s on the larger-scale institutional side.

And then from a private investor standpoint, which is investors that we’re targeting generally for small/mid-sized dispositions, that capital remains intact. And we’ve partnered with many buyers of that profile in our disposition efforts this year, including the $150 million sale that we pursued in Vaughan, for example, at attractive metrics. And then the last group— they’re still active; they’re not active every month or every quarter—is users. So we see users generally looking for opportunities. Right now we’re seeing maybe a bit more defense users than, let’s say, logistics. We are looking at selling one of our cross-docks to a user right now. So it still is a pretty active group of buyers.

Kyle Stanley (Analyst)

Okay, thanks for that. And then just the last one, switching over to, kind of, the power procurement data center side of things. Seems like you’re making good progress there. I guess two questions. One, is there any ability for you to kind of expedite the opportunity by pursuing maybe smaller assets? I mean, we are hearing about delays and pushback on some of the really large-scale projects. I’m just wondering if that could be brought forward by pursuing something smaller, if the demand is there from the end users that you’re discussing with.

And then the second part is obviously very early days and you may not have a comment on this, but with the U.S. elections and the rhetoric around moratoriums for data center development in the U.S., do you see an opportunity for some of those users to look to expand into Canada to offset maybe slower development activity in the U.S., and could that represent an even bigger opportunity down the road?

Alexander Sannikov (President & CEO)

Thanks, Kyle. Yes, we’re making good progress. So this quarter we made some tangible progress on a couple of sites, and as we commented in our prepared remarks, we have better visibility into contractual terms and timelines for power delivery on these two sites. And there’s more sites in the pipeline—actually more sites that are more significant in the pipeline—so we are to some extent encouraged that we’ll be piloting, if you will, smaller projects first.

Are we making progress at the same pace as we would like? No, it’s slower than we would like, but it’s good progress nonetheless. And when we look at our peers in the market who are pursuing power procurement efforts as well, our progress is probably in line—maybe better from a timing standpoint and zoning standpoint—than many of our peers. So we think that our sites are well-positioned in that regard. We’ll see what the feedback is from occupiers; given the timelines are now much more firm, we’ll get better feedback from potential users through our marketing efforts.

As to the magnitude of the opportunity, it’s hard to comment. Obviously it’s early days. So far our approach to power procurement has been limited capital, very strategically placed small bets to make meaningful impact, keep as much optionality open for all of our sites. We continue leasing them as industrial with redevelopment clauses, and as we advance that, then we’ll be able to unlock value potential in a measured way from a risk management standpoint.

Kyle Stanley (Analyst)

Okay, that makes sense. That’s it for me. I’ll turn it back. Thanks.

OPERATOR

Your next question is from Matt Cornick with National Bank of Canada Capital Markets. Please go ahead.

Matt Cornick (Analyst)

Good morning, guys. The Chancery Gate acquisition has kind of expanded your underway and substantially complete development portfolio. Appreciate the color you’ve given here in terms of cost to complete, existing costs, and the timing and the yield expected. But how should we think timing-wise relative to that cost of completion date in terms of when you’d see lease-up on those assets? And if you can give any indication on, kind of, pre-leasing progress on any of them that are meaningful, that would be great.

Alexander Sannikov (President & CEO)

Thanks. Thanks, Matt. So for one of the sites that is built, we have one-third leased, and there’s pipeline that takes us to two-thirds. That’s the West Sussex site that we featured in the press release. There’s two other sites that are kind of advanced, and they’ll be in lease-up throughout late ’26, early ’27. So on these three sites that are largely developed, we expect to be ramping up development into close—first half of ’27—sort of ramping up lease-up.

And then the other two sites are under construction, so lease-up is going to be— they will be delivering towards 2H ’27, by memory, and that’s when the lease-up is going to be taking place.

Matt Cornick (Analyst)

Okay, fair enough. Is there a standard kind of lease-up time frame for those type assets, or how should we think of that process?

Alexander Sannikov (President & CEO)

So it’s going to be less lumpy. Six to nine months is a good average. These are multi-tenant assets, which is great because from a risk management standpoint it’s a great product. It’s also very hard to—these are typical small-bay assets. In Canada it’s very hard to build small-bay, especially build it to these yields. And in Europe, especially through this platform, we are finding the opportunities to build small-bay to—I mean, it yields in between 7 and 8%, and we think that that’s attractive, especially given the profile of the product and how hard it is to find it.

So not only are we pursuing these assets, but as I mentioned earlier, there’s a couple of assets in our pipeline—small/mid-sized developments—that will be penciling to that 7 to 7.5% yield on cost range.

Matt Cornick (Analyst)

Okay, perfect. And then you mentioned earlier that you’re getting the benefit of embedded rent steps that you’ve put in over the last several years. Can you give us a sense as to where—like on new leases, even if you’re seeing kind of a downtick in market rents—are you still pushing through escalators, and what level would they be at this point for the broader market?

Alexander Sannikov (President & CEO)

From a percentage basis, contractual escalators are hovering around 3% for us. That’s in line with our existing in-place escalators for the portfolio, so it’s stabilized kind of in that range for now. In Europe it’s consistently inflation.

Matt Cornick (Analyst)

Last one for me. You mentioned Spectra in Quebec. Can you just give a sense—this is their second CCAA in not too long, but it seems like they survived the first one—just kind of the downside protection that may exist in terms of where that lease is and the opportunity? It sounded like Gord said that you think it’s a good space, but any additional color you can provide would be great.

Alexander Sannikov (President & CEO)

Yeah. Without commenting too much on the CCAA process just given we have some non-public information, et cetera, we generally are encouraged by the prospect. But what we’re most focused on is real estate, and it’s good real estate. And it’s actually probably better real estate—more in-demand real estate today—than five, six years ago when they went through CCAA for the first time. And what makes it more valuable is there’s power. There’s at least 5 megawatts of power on the site, so that’s helpful.

And also, as Gord said, we’re seeing across North America these automotive manufacturing facilities are getting absorbed in most cases by user-buyers in defense space. We’ve seen that in Europe as well. So both of these attributes, in addition to the scale of the site, should position this real estate well for potential exit or redevelopment. And so we obviously are hoping that the tenant will come out from CCAA stronger than before and they’ll continue operating the facility.

But we generally feel that we’re well-positioned from a value standpoint.

Matt Cornick (Analyst)

And just on the rent—like, their prior CCAA was right at the beginning of the pandemic, before industrial rents had kind of gone on a tear—did you reset rents back then? Are we to understand that it’s maybe below market, or how should we think of where rents are on the property?

Alexander Sannikov (President & CEO)

It’s in line. In line with market, I would say.

Matt Cornick (Analyst)

Okay, perfect. Thanks, guys.

Alexander Sannikov (President & CEO)

Thank you.

OPERATOR

Your next question is from Himanshu Gupta with Scotiabank. Please go ahead.

Himanshu Gupta (Analyst)

Thank you, and good morning. And sorry I joined late, so not sure if it has already been asked. Any tenants on watch list? And I just picked up the last commentary on Spectra. Is Spectra—on rent, I mean—are they current on rent?

Lennis Kwon (Chief Financial Officer)

Hi, Himanshu, it’s Lennis. On your first question on the watch list, there’s nothing of significance. We have a big portfolio, lots of tenants, so there’s always bound to be, you know, smaller ones here and there. So nothing out of the ordinary in terms of watch list. With respect to Spectra, yes, they are current on their rent.

Himanshu Gupta (Analyst)

Okay. Okay. So nothing on the watch list either in Ontario, Quebec, or Europe for now. Okay.

Lennis Kwon (Chief Financial Officer)

And nothing noteworthy.

Himanshu Gupta (Analyst)

Okay. Okay. And then, obviously, we saw this Ontario occupancy slippage this quarter. How’s the occupancy trending within the Summit portfolio, especially in Ontario? Any kind of there.

Alexander Sannikov (President & CEO)

Thank you, Himanshu. Within the Summit portfolio, the occupancy is in that 94 to 95% range in Summit, which is generally in line with market. Again, we are trying to be measured when we look at occupancy. Yes, we generally want to see occupancy in our buildings, but we don’t want to sacrifice rents too much. So it’s a balanced approach, and we’re well positioned to pursue that balanced approach given where our starting point is. In the Dream Industrial REIT wholly owned portfolio, the occupancy slippage is really one tenant that primarily drove it. And, as Gord said, we have—well, (a) the rent in place is probably half of market there, and (b) we have good user interest in that asset to acquire it at probably sub-5% yield on market rents, or at around 5% yield on market rents. So we think it could be good value. So we’re exploring a few ideas.

Himanshu Gupta (Analyst)

Okay. And so that one tenant driving the occupancy slippage, was that tenant—did not renew at the end of the term, is that what happened? Or other—they needed more—

Alexander Sannikov (President & CEO)

—space, and we moved them to another facility within the portfolio. But we couldn’t accommodate them in Dream Industrial REIT’s portfolio, so they moved them to another asset.

Himanshu Gupta (Analyst)

Got it. Okay. Okay. And then in that context, how’s the subleasing activity in the GTA especially now? Are you seeing some increase there?

Alexander Sannikov (President & CEO)

It has, as you know, subleasing activity has spiked in, call it, late ’23, early ’24, as the market was normalizing on the back of high inflation, high rates. And we’ve seen that trend downwards pre tariffs, let’s say pre Q1 ’25, and it has come back up to that level. It’s not significant. The subleasing activity is sub 1% of the total market inventory. So it’s not meaningfully impacting the market, but it’s still there. It has not come back down yet.

Himanshu Gupta (Analyst)

Got it. Okay. Okay. Sticking to GTA, I mean we saw the large acquisition within that CPP JV portfolio. I think pricing is around like $280 per foot. Just wondering how much is pricing down from the peak, do you think? And are you seeing any impact on capital?

Alexander Sannikov (President & CEO)

It sort of depends on what you define as the peak, Himanshu. We certainly have seen trades in the GTA well into the 3s, and we still are selling assets well into the $300 a foot, 350 in some cases higher. And what it takes sometimes is just finding that right opportunity and the right buyer. So it’s definitely off, let’s say, the peak pricing. Now what’s important to highlight is peak lasted for a couple of months and it wasn’t like we stayed at the peak for a prolonged period of time. So it was maybe a couple of trades at those levels which are hard to extrapolate onto the entire market.

Cap rates: what we see in Canada is a bit of competing forces. There is more demand for industrial. Having said that, interest rates are up since August and so far the competing forces result in kind of cap rate environment not moving out. So we’re not expecting, we’re not seeing materially higher cap rates because there’s consistent demand for industrial. But there’s a few conversations here and there, I guess, on adjusting cap rates.

Himanshu Gupta (Analyst)

What was the cap rate on this transaction in particular?

Alexander Sannikov (President & CEO)

We’re not disclosing individual transaction cap rates for our individual partners, just from a confidentiality standpoint. We did comment—as you said, you dialed late, so you probably didn’t hear—we did comment on the cap rates for the entire $800 million that we announced this quarter across our private ventures of around 6%, but we didn’t comment on specific cap rates for individual portfolios.

Himanshu Gupta (Analyst)

Yeah, and this could be very much in that 6% ballpark, I believe, you know, given the vintage in the last three, four years, rents being in mid-teens, so kind of makes sense. Okay, last question on 2027 lease expiries. Europe is obviously going to be a big year in terms of expiries next year. So any expectation there of space coming back or rental spreads?

Alexander Sannikov (President & CEO)

Nothing significant. We’re in renewal discussions for some of our larger occupiers there, and so that’s well taken care of. There will be a few things here and there, but generally speaking, the majority of these expiries are in discussion.

OPERATOR

Thank you so much. Thank you. Your next question is from Dean Wilkinson with CIBC. Please go ahead.

Dean Wilkinson (Analyst)

Thanks. Morning, everyone. Just got a quick question on supply. I guess in prior cycles where we’ve seen robust rent growth, high demand, all of those sort of things, it’s introduced speculative build into the market. But when you look at it today, I mean, I don’t know what the number is, probably closer to 300 bucks a square foot on a new build. Does the math work? And how much do you think market rents would need to move in order to maybe convert some of that robust institutional demand for the product to turn into speculative build?

Alexander Sannikov (President & CEO)

That’s a great question. Thanks, Dean. Yes, spec supply sits at sub 1% of inventory nationally, which is low, and it contributes to constructive fundamentals for industrial overall. When we look at new development—and especially, you know, we just talked with Himanshu about cap rates maybe moving up a little bit—so then you need your yield on cost to be higher, and construction costs are generally trending upwards. Steel is more expensive, roofing materials are more expensive. And so that’s not helping the yield on cost. And the rent, as you just pointed out, is not high enough to justify leaning into developments for the market as a whole.

Yes, there will be select pockets, select assets, select sites where maybe the developers have the right basis, etc. They’ll continue pursuing that, but generally speaking, it’s hard. Every market is a bit different, but it’s probably about 15% where we need to see rental movement before it makes sense to lean into development.

Dean Wilkinson (Analyst)

Okay, that’s helpful. Thanks.

OPERATOR

Your next question is from Pam Eber with RBC Capital Markets. Please go ahead.

Pam Eber (Analyst at RBC Capital Markets)

Thanks. Good morning. I did want to circle back on the Spectra bankruptcy. At this point, can you say whether maybe it seems more likely that they will remain in the space or more likely to exit? And then maybe the second part to that is if there is downtime, what would sort of be your estimate of how long it could take to backfill that space?

Alexander Sannikov (President & CEO)

I just want to be clear, it’s not bankruptcy—CCAA process, which is different. So they are continuing to operate the business and paying rent, etc. When Spectra went through CCAA last time, they gave back some space that we had with them, primarily warehousing space, but kept this facility because this facility is essential to the business. As Gord said, through our dialogue we’re seeing encouraging signs that as they continue operating the business and the feedback we’re hearing, we are generally encouraged that they’ll emerge from this process and will continue operating.

It wasn’t an issue of the business, let’s say, that put them into CCAA to begin with this go-around—more an issue of capitalization of the business. And so from that perspective we are generally encouraged, but there’s nothing that is certain here. So we’re watching the situation. The downtime is going to depend on the plan that we will pursue that will lead to the highest value for the asset. At this point, if, say, we get the asset back, we are more likely pursuing a user sale of some sort than re-leasing. But it’s early days to comment on that specifically. We’ll obviously keep the market updated. So generally speaking, we are feeling encouraged in terms of the value of the asset and our ability to realize that.

Pam Eber (Analyst at RBC Capital Markets)

Got it. Okay, that’s helpful. Just coming back to I think one of the earlier questions on the 2028—or just on the lease maturities as a whole—but if you look specifically at 2028, do you see a scenario where the rents at that point would be rolling down just given the gap is relatively tight to in-place versus market in that year?

Alexander Sannikov (President & CEO)

Well, as you know, we disclose in-place rents for individual maturities. We disclose market rents for the whole portfolio, so there are some idiosyncrasies for the different assets. Do we see a scenario that it can be rolling down? Well, yeah, of course it’s possible. If we see a sharp increase in vacancy and decline in rent, then that is possible. But given the state of the market today, it doesn’t seem likely given the occupancy rates that we’re seeing, given the absorption patterns that we’re seeing across Canada, and given the low supply pipeline that we just talked about.

The market is at least stable and generally is improving, and with that we’re already seeing rents growing in ’26 in certain markets and we expect that that will continue into ’27 and ’28.

Pam Eber (Analyst at RBC Capital Markets)

Okay, and then just in terms of maybe a question for Linus. In terms of the upcoming debt maturities, how are you thinking about duration in terms of what term debt you want to put in? Or I guess maybe would the approach be similar to what you did with the Series I debentures? And then just lastly, I guess as part of that, where pricing looks today.

Lennis Kwon (Chief Financial Officer)

Sure, there’s a few questions in there. So in terms of tenure, we’re typically active in that three- to five-year term, so that’s probably where it will land. But we also want to stagger the debt maturity, so we’ll be mindful of that. In terms of approach, on the last debenture we fixed some of it and left some of it floating. We could take a similar approach. I think one thing that’s certain in this market is it changes day by day, so I think we want to be nimble in this environment and we at least have the flexibility to be able to do that.

So it could be a combination of some floating, or if we catch a good point in market, we could fix it all at the time we issue. And current rates: three years probably in the low fours; five-year term, sort of in that low to mid-fours, like 4.40% to 4.50% range on five-year terms.

Pam Eber (Analyst at RBC Capital Markets)

And that’s in—

Lennis Kwon (Chief Financial Officer)

Canadian. In euro equivalent—yeah, yeah. I mean, the spread between euro and CAD is probably in that 10–15 basis points right now. Again, that changes day by day.

Pam Eber (Analyst at RBC Capital Markets)

Okay, sorry, the pricing that you quoted was in euro swaps. Right. Okay. Just lastly, I think the question was asked in terms of the upcoming—any large known vacancies in Europe. But just when we think about the whole portfolio, any large known vacancies for the overall portfolio in 2027?

Alexander Sannikov (President & CEO)

There’s a couple of pockets—so 200,000 square feet, plus/minus—that we know of coming back to us at different points in ’27. It’s certainly meaningful but not material to the overall portfolio.

Pam Eber (Analyst at RBC Capital Markets)

Great, thanks very much. I will turn it back.

OPERATOR

Thank you. Once again, if you have a question, press Star then 1. Our next question comes from Matt Cornick with National Bank of Canada Capital Markets. Please go ahead.

Matt Cornick (Analyst)

Sorry, guys. Just two quick model housekeeping questions here. For the core G&A, even ex the fee income, it seemed like it was a bit high on the professional and other component. Was there anything one-time in that? And then second question, just on NCIB. Going forward, I’d assume, given the balance sheet, that we should not be assuming any share buybacks in the near term.

Meaghan Peloso (Chief Financial Officer)

The G&A—you know, there’s a little bit of lumpiness. Why don’t I give you a call back? I’ll dig into it and I can give you a call.

Alexander Sannikov (President & CEO)

And on the NCIB, Matt, look, we remain focused on the balance sheet strength and liquidity at this point—unless we recycle capital meaningfully, and we’ll see where the stock price is at relative to other opportunities we have in front of us. Yeah, we’re not active on NCIB.

Matt Cornick (Analyst)

Makes sense. Thanks.

OPERATOR

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

Alexander Sannikov (President & CEO)

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

OPERATOR

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

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