TORONTO--(BUSINESS WIRE)--Dream Industrial REIT (TSX: DIR.UN) (“Dream Industrial”, “DIR”, or the “Trust”) announced today that it has successfully priced a private placement offering of $800 million aggregate principal amount of unsecured debentures (the "Offering") for aggregate gross proceeds to the Trust of $799.8 million consisting of a $200 million re-opening of the 1.662% Series A Debentures maturing in 2025 (the "Series A Debentures"), $200 million of Floating Rate Series B Debentures maturing in 2024 (the "Series B Debentures") and $400 million of 2.057% Series C Debentures maturing in 2027 (the "Green Bonds") (collectively, the "Debentures").
The Series A Debentures, the Series B Debentures and the Green Bonds are expected to be rated BBB with a Stable Trend by DBRS Limited.
The Series A Debentures will be issued at a price of $999 per $1,000 principal amount (plus accrued interest from December 22, 2020) and bear interest at a rate of 1.662% per annum and mature on December 22, 2025. The Series A Debentures will have the same terms and conditions, and constitute part of the same series, as the $250 million aggregate principal amount of the Series A Debentures issued by the Trust on December 22, 2020, except for their date of issue and price to the public and except that they will not initially be fungible with the Series A Debentures issued on December 22, 2020. The Series A Debentures offered hereby will initially have a different CUSIP number from the Series A Debentures issued on December 22, 2020 but on or about October 18, 2021, the Series A Debentures offered will become fungible with, form part of a single series with, and have the same CUSIP number as the Series A Debentures issued on December 22, 2020. Interest is payable on the Series A Debentures on June 22 and December 22 of each year, commencing on June 22, 2021.
The Series B Debentures will be issued at a price equal to $1,000 per $1,000 principal amount and bear interest at a rate per annum equal to the Reference Rate Index for Canadian dollar bankers’ acceptances with maturities of three months (3 month CDOR) plus 0.35% and will mature on June 17, 2024. Interest is payable on the Series B Debentures, and the Reference Rate Index will be adjusted on, June 17, September 17, December 17 and March 17 of each year commencing September 17, 2021.
The Series C Debentures are the Trust's inaugural issuance of Green Bonds under its recently announced Green Financing Framework (the "Framework"). The Green Bonds will be issued at a price equal to $1,000 per $1,000 principal amount and bear interest at a rate of 2.057% per annum and will mature on June 17, 2027. Interest is payable on the Green Bonds on December 17 and June 17 of each year commencing December 17, 2021.
The Debentures to be issued will be direct senior unsecured obligations of the Trust and will rank equally and rateably with all other unsecured and unsubordinated indebtedness of the Trust, except to the extent prescribed by law.
The net proceeds of the Offering are expected to be used in part to fund a portion of the purchase price (including adjustments) for the acquisition of shares of a corporation that owns a portfolio of 31 institutional quality, logistics properties across Europe (the "Acquisition") and, with respect to the net proceeds from the sale of the Green Bonds, will also be used to finance and/or refinance eligible green projects within the meaning of the Framework. The Trust may use a portion of the net proceeds to repay existing indebtedness.
The purchase price for the Acquisition is anticipated to be approximately $850 million and will be funded, in part, by the proceeds of this Offering, in part by the proceeds from the $287.5 million public offering of subscription receipts which closed on May 31, 2021 (either directly or to repay debt incurred) and, in part, through existing liquidity including cash on hand and capacity under the Trusts’ revolving line of credit. The portfolio of properties being acquired pursuant to the Acquisition has approximately $500 million of in-place debt which the Trust is expected to assume by virtue of acquiring the shares of the corporation that owns the portfolio. The weighted average interest rate on the in-place debt is approximately 1.3% with an average remaining term of 2.5 years.
If the Acquisition is not completed by August 30, 2021, or upon the occurrence of certain other events, the Series B Debentures and the Green Bonds will be automatically redeemed at 100% of their principal amount plus accrued and unpaid interest to the date of redemption. The Series A Debentures are not subject to automatic redemption in these circumstances and, accordingly, if the Acquisition is not completed as expected, the net proceeds to be received by the Trust from the sale of the Series A Debentures may instead be used for other proposed acquisitions and general trust purposes.
The offering of the Debentures is expected to close on June 17, 2021. The Trust intends to enter into cross currency interest rate swap arrangements to swap the proceeds of the Offering to Euros to lower the effective interest rate on each series of Debentures.
The Debentures are being offered on a private placement basis in each of the provinces of Canada in reliance upon exemptions from the prospectus requirements under applicable securities legislation. The Debentures are being offered on an agency basis by a syndicate of agents led by TD Securities Inc., Scotia Capital Inc., RBC Dominion Securities Inc. and National Bank Financial Inc.
Update on the Acquisition
The Trust is in exclusive and advanced discussions with regards to the Acquisition, which would significantly enhance the Trust’s overall portfolio quality and scale in key industrial markets and establish a comprehensive pan-European real estate platform, including in-house development capabilities. The total value of the real estate in connection with the Acquisition is expected to be approximately €880 million or $1.3 billion which implies a going in capitalization rate in the low 4% range, inclusive of excess land. The Trust estimates that the development potential on the excess land included in the portfolio is approximately 1.1 million square feet and could generate a yield on incremental development costs of over 7%. The Acquisition enhances the Trust’s overall portfolio quality significantly. On average, the buildings were built in the mid-2000s and have an average clear ceiling height of approximately 35 feet. A majority of the properties have strong income growth potential with in-place rents estimated to be on average 10% below market. Including both the development and rent growth potential, the Trust expects the blended yield on the portfolio to be in the high 4% range. The vendors include entities controlled by certain funds managed by Clarion Partners Europe.
The Trust anticipates that, if an agreement is entered into, the Acquisition will close in the next 45 days. There can be no assurance, however, that a definitive agreement will be reached on the terms described in this press release, or at all.
The Trust is also in advanced negotiations on various dispositions and joint venture strategies, primarily involving its U.S. portfolio, and anticipates it will repatriate over $250 million of equity at values in excess of March 31, 2021 IFRS carrying values. The Trust intends to maintain leverage within its previously communicated target range of mid to high 30% over the long term.
Osler, Hoskin & Harcourt LLP acted as counsel to the Trust and Torys LLP acted as counsel to the agents.
The Debentures have not been and will not be qualified for sale to the public under applicable securities laws in Canada and, accordingly, any offer of the Debentures in Canada will be made on a basis which is exempt from the prospectus requirements of such securities laws. The Debentures will not be listed on any stock exchange and there will be no market for such securities. The Debentures have not been, and will not be, registered under the United States Securities Act of 1933, as amended, or any state securities law and may not be offered or sold in the United States and may not be offered or sold to other persons who are not residents of a province of Canada.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Debentures in any jurisdiction in which such offer, solicitation or sale would be unlawful.
About Dream Industrial Real Estate Investment Trust
Dream Industrial REIT is an unincorporated, open-ended real estate investment trust. As at March 31, 2021, Dream Industrial REIT owns and operates a portfolio of 186 industrial assets (280 properties) comprising approximately 28.8 million square feet of gross leasable area in key markets across North America and a growing presence in strong European industrial markets. Dream Industrial REIT’s objective is to continue to grow and upgrade the quality of its portfolio and to provide attractive overall returns to its unitholders. For more information, please visit www.dreamindustrialreit.ca.
Forward Looking Information
This news release may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking information generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans”, or “continue”, or similar expressions suggesting future outcomes or events. Some of the specific forward-looking information in this news release may include among other things, the anticipated purchase price and terms of the Acquisition; the anticipated closing timeframe of the Acquisition; the expected value of the portfolio acquired as part of the Acquisition; the development potential of the excess land to be acquired as part of the Acquisition including the yield potential; the growth potential of the properties acquired as part of the Acquisition; our ability to close on the Acquisition; our ability to close the Offering and the cross currency interest rate swaps; the closing date of the Offering; the anticipated fungibility of the Series A Debentures offered hereby; the intended use of net proceeds of the Offering; our plans to continue advancing sustainability and impact initiatives for DIR; plans for future green investments and sustainability initiatives; disposition plans and joint venture strategies primarily in its U.S. portfolio; and plans to maintain its leverage in the mid to high 30% over the long term. 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. These risks and uncertainties include, but are not limited to, global and local economic and business conditions; uncertainties surrounding the COVID-19 pandemic; the financial condition of tenants; our ability to finance or refinance eligible green projects; interest and currency rate fluctuations; competition; and the risk that there may be unforeseen events that cause the Trust’s actual capital structure, overall cost of debt and results of operations to differ from what the Trust currently anticipates. Our objectives and forward-looking statements are based on certain assumptions with respect to each of our markets, including that the general economy remains stable, the gradual recovery and growth of the general economy continues over the remainder of 2021, interest rates remain stable, conditions within the real estate market remain consistent, competition for and availability of acquisitions remains consistent with the current climate, the capital markets continue to provide ready access to equity and/or debt, the timing and ability to sell certain properties remains in line with the Trust’s expectations, valuations to be realized on property sales will be in line with current IFRS values, occupancy levels remain stable, and the replacement of expiring tenancies will remain consistent. All forward-looking information in this news release speaks as of the date of this news release. Dream Industrial REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise except as required by law. Additional information about these assumptions and 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 at Dream Industrial REIT’s website at www.dreamindustrialreit.ca.