Dream Industrial Real Estate Investment Trust Stock

Welcome to the Dream Industrial REIT Second Quarter Conference Call for Wednesday, August 5, 2026. [Operator Instructions] And the conference is being recorded.

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 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 on Dream Industrial REIT's website at www.dreamindustrialreit.ca.

Your host for today will be Mr. Alexander Sannikov, CEO of Dream Industrial REIT. Mr. Sannikov, please proceed.

Thank you. Good morning, everyone. Thank you for joining us today for Dream Industrial REIT's Second Quarter 2026 Conference Call. Here with me today is Gordon Wadley, our Chief Operating Officer; and Lenis Quan, our Chief Financial Officer.

We delivered another quarter of strong operating and financial results and achieved some significant milestones during the quarter. For the quarter, we delivered 10.3% year-over-year comparative properties NOI growth, driven by healthy leasing activity, leasing spreads and strong occupancy. The strong pace of organic growth drove FFO per unit growth nearly 8% over last year. We also announced a 2.5% increase in our distribution, first since 2013. This increase is supported by our robust operating and financial performance to date, the progress we have made in establishing various growth drivers for our business, our solid balance sheet and most importantly, the confidence we have in the outlook for the business.

It is also consistent with our objective of increasing the distribution over time at a pace that represents a portion of our free cash flow growth so that the amount of retained cash flow available to be reinvested in our business continues to compound. We are executing on our strategic priorities and a key focus this year is redeploying the proceeds from the initial portfolio sale to the DCI venture with CPP Investments, which was completed in 2 tranches earlier this year. We have made good progress on the redeployment front. In addition to our NCIB activity, since the beginning of the year, we have completed or placed under contract over $515 million of acquisitions across our wholly owned portfolio at accretive returns.

Within our wholly owned portfolio, we have completed $332 million of acquisitions so far this year, adding over 2 million square feet of urban infill, small bay and mid-bay assets across Canada and Europe. These assets were acquired at a going-in yield of approximately 6.3% with strong embedded rental growth translating into mark-to-market yield of approximately 7.4%. More recently, we completed the acquisition of an 11 asset portfolio located across major German urban areas with in-place rents approximately 20% below market.

We have further $140 million of acquisitions under contract or in exclusive negotiations across Canada and Europe that are expected to close in the third quarter at similar going-in yields and mark-to-market potential. In addition, we announced the Chancerygate transaction last week. This transaction helps us achieve multiple strategic objectives for our European business. We are entering the U.K. multi-let industrial sector, which is underpinned by strong structural demand tailwinds and constrained urban land supply. It is a natural extension of the small and mid-bay strategy we have been executing across our markets. We're entering the market with a high-quality wholly owned portfolio of recently completed development assets in addition to 2 projects currently underway. We expect to invest $150 million in these assets at an expected yield on cost of 8%.

Lastly, we are adding immediate scale to our Private Ventures segment in Europe through existing vehicles and a new programmatic JV. For the existing vehicles, we are acquiring just over $40 million of co-investment interest alongside institutional partners in several JVs with a gross asset value of over $2 billion. These assets are expected to generate stabilized unlevered yield on cost of 7.5%. Given the scale of these JVs in the U.K., we will explore opportunities to establish a property management platform in this market to grow our recurring revenue further. In addition, we're in advanced negotiations to set up a new partnership with a target gross asset value of $800 million, also focusing on multi-let industrial assets, primarily in Continental Europe.

DIR is expected to have a 5% stake in this new JV and provide property management and leasing services in Germany and Netherlands where we have an in-house platform. Our existing Private Ventures segment is performing well and continues to scale and contribute to our overall earnings. Operationally, the performance is in line with our business plan as we see improving fundamentals across our markets. Since the beginning of 2025, these JVs have completed over $660 million of acquisitions in addition to the recapitalization of the seed portfolio by the DCI JV. And our net property management income grew nearly 28% year-over-year this quarter.

The acquisition pipeline remains robust for our JVs through marketed and off-market opportunities. And in addition, we continue to recycle capital out of nonstrategic assets at accretive returns. Lastly, we're making progress on our power procurement program for select assets that we have identified as candidates for data center development. We are responding to various RFPs from occupiers and have seen the level of engagement generally increasing over the past quarter. In parallel, we are working with various utilities to put in place formal agreements for power delivery timelines. We will report back with more details as we make progress.

Overall, we are encouraged by our financial results, operational progress and advancement of our strategic initiatives. I will now turn it over to Gordon to discuss our operational highlights.

Thank you, Alex. The industrial sector is demonstrating resilience despite ongoing volatility from macro events. The Canadian industrial market strengthened over the prior quarter. National availability declined quarter-over-quarter with most major markets posting flat or reduced availability.

Moreover, the new supply pipeline continues to moderate, supporting leasing fundamentals in major markets nationally. We expect these trends to support continued absorption and rent growth expectations across most of our operating markets. These trends and improving market dynamics are reflected in our operating results. Committed occupancy in Canada was 96.8% at quarter end, up 150 basis points from a year ago, while our in-place occupancy of 96% is 200 basis points higher year-over-year.

This absorption is driven by the lease-up of several vacancies in Quebec and our recently completed development in Alberta, which is now 100%. We are seeing more deal velocity, including development leasing. We have completed 247 deals for over 6.1 million square feet across the whole platform, inclusive of private ventures since January of 2026. Of this, 173 deals for 3.3 million square feet were leased across our wholly owned DIR portfolio at a weighted average rental spread of 21.1% over prior or expiring rents, including 1.1 million square feet of new leasing. Leasing economics remain disciplined. WALT continue to be stable with average lease terms of 4.1 years. Compared to 2025, we are seeing a reduction in lease incentives across major markets, resulting in continued growth in net effective rents portfolio wide.

This trend is strongest in Calgary, where we are starting to see a healthy pace of rental growth and upward pressure on rental escalators. We are also seeing it impact the GTA as surplus availability in that market gets absorbed. We expect incentives to normalize further, in turn putting upward pressure on net effective rents and ultimately translating to higher face rents. Our development leasing momentum has also accelerated. During the quarter, we signed over 370,000 square feet of leases at projects across our broader industrial platform, including the Greater Toronto Area and the Kitchener-Waterloo corridor. Notably, we signed a 265,000 square foot 10-year lease with a global automotive manufacturer at our project in Cambridge, Ontario, bringing the property to 100% occupancy starting in the third quarter.

This project has now generated an unlevered yield on cost of 6.7%. Subsequent to the quarter, we entered into a binding lease for 127,000 square feet at our recently completed redevelopment project in Whitby and are in advanced negotiations for another 110,000 square feet, which would lift occupancy at the property to over 60%. Over in Europe, leasing velocity for urban mid-bay assets has remained resilient, and we continue to see positive absorption in that segment, while absorption timelines for larger bay products have been somewhat slower. In-place occupancy in Europe was 92.5% at quarter end, primarily reflecting an anticipated transitory vacancy in Spain as well as the vacant value-add asset in the Netherlands that we acquired last quarter.

We are in advanced negotiations to lease up both vacancies. The leasing pipeline remains strong with multiple ongoing negotiations. Despite the temporary occupancy pressure, our European portfolio delivered solid comparative properties NOI growth of 5.6% year-over-year in the quarter. This growth was supported by CPI-linked rent increases, higher rents on new and renewed leases and contributions from completed intensification projects. Importantly, our European leases are indexed to local CPI or include contractual rent steps, providing embedded annual growth across the portfolio. As those indexation provisions reset, they provide potential upside to NOI in 2027.

In addition, our transitory vacancies are attracting good lease discussions and tours, which when leased, would set us up well for the strong operating performance in our European portfolio to continue into next year in terms of occupancy and CP NOI growth. Overall, our leasing pipeline remains healthy with over 35 deals and 2.5 million square feet in various stages of negotiations, coupled with continued tour velocity and deal economics. We are encouraged by the trajectory of our occupancy across the portfolio for the balance of 2026.

I will now turn it over to Lenis to discuss our financial highlights.

Thank you, Gordon. Our portfolio delivered comparative properties NOI growth of 10.3% for the quarter, led by 14.6% growth in the Canadian portfolio and 5.6% growth in Europe. This strong pace of organic growth, along with higher property management income, contributions from acquisitions and development lease-up and the benefit of our NCIB activity drove diluted FFO per unit to $0.28 for the second quarter, 7.8% higher than the prior year quarter. These factors more than offset the impact of refinancing at higher interest rates and operating at lower leverage following the asset sale to the DCI JV.

Our net asset value at quarter end was $16.76 per unit, in line with the prior quarter, reflecting stable investment property values. At the end of June, we closed the second tranche sale of assets to the DCI venture for net proceeds of $353 million. The proceeds were used to partially repay our revolving credit facility and to fund acquisitions completed subsequent to the quarter. We ended the quarter with approximately $750 million in available liquidity, leverage of 35.8% and a net debt-to-EBITDA ratio of 6.6x. As we deploy our available balance sheet capacity over the remainder of the year, we expect leverage to trend back towards our targeted high 30% range and our run-rate net debt-to-EBITDA to trend towards the mid-7x range.

The 2.5% distribution increase will take effect with our September 15 distribution, bringing the annualized rate to $0.7175 per unit. With an FFO payout ratio of 63% this quarter, the increase is well covered. We intend for future distribution increases to be sized at a level below the pace of FFO per unit growth, ensuring the business continues to grow its retained cash flow. Our first half performance demonstrates the strength of our business, and we remain confident in our growth trajectory for the balance of the year. For the full year 2026, we continue to expect average in-place occupancy in the high 94% to low 96% range. With our strong results for the first half of the year and the healthy leasing momentum across the portfolio, we are raising our full-year expectations for comparative properties NOI growth to be 7% to 8%, well above the 5.7% growth we delivered in 2025.

Based on the pace of our capital deployment, we expect full-year FFO per unit to come slightly ahead of our previous outlook. Overall, the previously communicated range of $1.08 to $1.10 is intact, and we are now expecting the results to be slightly above the midpoint. The Chancerygate assets are not expected to have a significant impact on 2026 FFO. We expect them to start contributing to FFO as they are stabilized and become income-producing over the next 6 to 18 months, depending on their stage of development completion. As always, our FFO growth expectation is predicated on current foreign exchange rates and interest rate expectations.

I will turn it back to Alex to wrap up.

Thank you, Lenis. Dream Industrial's business is anchored by a functional high-quality portfolio supported by a diverse occupier base and meaningful new revenue streams. Our results this quarter highlight the evolution of the total return model for DIR offers to its unitholders. We remain focused on delivering sustainable and growing free cash flow that we'll look to reinvest back into the business as our opportunity set continues to expand. We will now open it up for questions.

[Operator Instructions] The first question comes from Brad Sturges with Raymond James.

On the new pan-European JV that you're in advanced discussion on, I'm just curious if you could give a little bit of color in terms of if it gets consummated, what the investment strategy and return profile could look like for that new fund?

Thank you, Brad. Well, the investment strategy will be focused on multi-let industrial assets. So a similar profile to what Chancerygate already owns and manages. It will be a mix of standing assets in development with an overall value-add return levels and geographically geared towards Continental Europe.

Would there be potential to be seeding some of that portfolio from the wholly owned assets you own today? Or would it be strictly more of a third-party acquisition vehicle?

It's generally focused on new acquisitions. We are not contemplating seeding this JV with any of the assets right now, but there's always possibility to have conversations. Nothing is ongoing at the moment.

And just for my understanding on Chancerygate, what's the pre-leasing rate of the assets either substantially completed or under construction, just to get a sense of what leasing is left to do, if any?

Yes. So these are multi-let assets. As such, they don't get pre-let during construction. They get leasing starts generally when the assets are built. So out of just under 300,000 square feet of assets that are the most advanced vis-a-vis construction, just over 100,000 has been built and delivered in Q1. So that asset has been in lease-up. And there, we are just about to finalize the lease for about 30% of the space and in advanced negotiations for another 15%. So it's going quite well, and the asset was just delivered in the first quarter, just highlighting the leasing velocity for this kind of product. And then the other 2 assets are going to be delivered in September. So leasing marketing is starting, but the lease-up will likely start ramping up.

And sorry, what would be generally your expectations for the time line for a full lease-up process to reach stabilization once the construction is completed for these type of assets?

It will be gradual over the next 12 months, maybe shorter. It will be gradually ramping up for these assets.

Your next question comes from Sam Damiani with TD Cowen.

Congrats on the good results in the quarter and securing the opportunities to deploy the capital from the DCI JV. With the sort of slightly raised guidance for this year, just wondering how that makes you think about the trends going into 2027, both on same property and FFO growth.

Thank you, Sam. I think the trajectory is intact. We haven't provided a formal outlook for 2027 yet but the overall trajectory is consistent and the drivers are all intact and are compounding as hopefully, you can see from our results and the progress we're making whether it's the same-property NOI pace, whether it's additional revenue sources are contributing. And our in-place cost of debt is getting closer and closer to our marginal cost of debt. Therefore, the refinancing headwinds are going to be less pronounced into '27 and into '28. And so we are encouraged by that and encouraged by the overall trajectory of the earnings growth.

And just, I guess, more specifically, would the slightly higher growth this year in any way sort of take away from the potential next year? Like are you capturing growth earlier than expected? Or is the absolute growth?

No, we're not capturing growth earlier than expected on same property side. If anything, recapturing the growth that we are delivering with kind of occupancy levels that are generally below the run rate. So there's more potential from occupancy going up. And as Gordon suggested in his remarks, we're starting to see more evidence of rental growth, especially in Alberta, starting to see net effective rents moving positively in markets like GTA. We continue to see rental growth in certain pockets in Europe. So the rental growth should be an added driver as that trend continues.

And maybe on the intention to establish a property management platform in the U.K. Do you have a timeline on that as to when, I guess, the expenses might ramp up and revenues start to be recognized?

Yes, Sam, I wouldn't say that that's the intention, it's an opportunity. So we underwrote the Chancerygate transaction primarily on the basis of the assets that we're buying and the returns that we're buying. And then obviously, that opens up the opportunity set for us to continue deploying in the U.K. through an established operation, both in development and standing assets. When we looked at the existing ventures the returns that we're getting there is compelling and attractive. And so that's how we underwrote it. The opportunity to establish a property management platform is going to be additive to that. And then we're putting emphasis on this new JV that is going to be ramping up in the markets where we're already present from a property management capability standpoint.

And last question for me is on the property management margin. I think previously, you had communicated some sort of 5-year guidance on how that margin could grow. And now with the Chancerygate announcement made and the new JV being created, do you have a new kind of growth target for the property management fee margin?

We'll provide that when we communicate the guidance for '27. But generally, it's intact, perhaps slightly better as we're seeing more scale to that business.

Your next question comes from Himanshu Gupta with Scotiabank.

So guidance was increased on same-property NOI growth for this year. Which region is driving that increase in expectations? And then on the Spain vacancy, do you see that being backfilled in your guidance?

Thank you, Himanshu. On the Spain vacancy, it's not materially impacting our NOI outlook. Rents in Spain are growing, but they're still relatively low. So while this is impacting the occupancy numbers, especially occupancy numbers for Europe, optically, it doesn't really change the NOI all that much given the rents are still relatively low. We are in advanced negotiations there, as Gordon suggested, to potentially commence for the occupancy to commence this year, but it doesn't change our outlook dramatically.

And regionally, as we communicated when we issued the same-property NOI outlook earlier in the year when we said that it would be stronger than '25 despite relatively strong first half of '26 being expected, we kind of baked in some reserves for timing of lease-up. And now we're seeing the leases -- contracted leasing coming through, strong retention. So we are confident to increase that outlook, and that's across the board, really. It's not driven by any particular region.

And then on the lease incentives, how do you see that evolving? I know you made a comment in your prepared remarks on incentives. Just wondering what was the peak and where are we now, specifically in the GTA?

Yes. Good question, Himanshu. It's Gordon. We're seeing some NER compression right across the portfolio. It's most pronounced in Western Canada. But as the new supply starts to dry up, which it has been and get absorbed in Toronto, we're starting to see reductions as well too in the GTA. Where we're noticing the most of the reductions in Western Canada has predominantly been driven by direct deals of our leasing teams. So we're mitigating commission costs. And then also, too, we've been mitigating some deal and allowance costs.

In the GTA, we're predominantly seeing less free rent in deals. And the other spot where we've been doing quite well as an operating team is on renewals. We're having a number of tenants exercise their option to renew given the low supply. And in many of those cases, costs associated are being reduced. So, we're seeing that predominantly in Western Canada, the GTA and some marginal tightening as well, too, as the supply gets absorbed in the Greater Montreal area.

And sorry, in Montreal also, you're seeing that trend coming through lease incentives reduction?

No, not necessarily lease incentive reductions, but we are starting to see more absorption. This was one quarter if you look at some of the national stats where Montreal has had some positive absorption. So, we're starting to see more good deal flow. The small and mid-bay sector in the GMA has been quite good and quite resilient. So we're seeing more competitive deals there. But traditionally, as we have advised over the last few quarters, Himanshu, the larger bay is still quite competitive and soft in the region.

And then just moving to capital deployment. A bunch of these acquisitions announced -- so are the proceeds from CBG disposition, is that fully deployed now? Like once we include the post-quarter acquisition, Chancerygate and the under due diligence acquisitions?

Thanks for that, Himanshu. We still have -- we're largely through the redeployment. They still have some acquisition capacity to get to our target leverage on the debt-to-EBITDA basis and well, to get back to the leverage that we were at prior to the transaction. So we have a little bit more capacity to go.

And then just looking at the acquisitions, I mean, almost $200 million in Germany, I think, post quarter. You mentioned 20% below market, I mean, in that sense, what is the lease term for that particular acquisition in Germany?

It's relatively short lease term, 3 to 5 years, depending on the assets, but on average, I think, in the 3 and change range. Good assets, urban mid-box product in major markets, strong diverse occupier base. There's some single assets there, but also some are portfolio where one portfolio deal that we just completed. We very much are enthusiastic about the profile of this acquisition given the strong going-in yield and the mark-to-market potential. So, we're looking at kind of on the German assets overall, we're looking at about 6.3 going in cap rate with mark-to-market cap rate taking us to kind of mid-7 range, which we think is a compelling profile.

And maybe just the last one. I mean, how does Germany compare to the U.K., like in terms of market rent growth expectations? And I know you just entered the U.K. with a great chance. So just wondering, do you rank one over the other in your outlook?

Look, we will look at every opportunity, and we will compare the total return underwriting between -- well, amongst all acquisitions that we pursue. And we also try to look at sort of the risk-adjusted returns, vis-a-vis the assumptions that we need to put into our model to get to that level of total return. And so, the more assumptions that we need to put in, the higher the risk of that underwriting. So, what we like about Germany is that we can get to attractive total returns without necessarily putting a lot of stress into the underwriting model. And from our existing portfolio, we've seen strong evidence of rental growth in the urban nodes, especially for these midsized footprints. And so, we expect that that will continue because we're not seeing a lot of supply of this kind of product. And so, we're not really seeing how that pressure on the occupier market is going to be change.

When we look at the U.K., well, part of the reasons why it took us a while to enter the U.K. market is we were looking at opportunities that would provide a return premium relative to deploying in our existing markets that we know well already. And so, with Chancerygate opportunity we found that where we're acquiring very high-quality assets that we target 8% yield on cost, and that's untrended yield on cost. So, we think that that's attractive. We also think that the U.K. opportunity offers differentiated growth profile through the rent review mechanism that doesn't exist on the continent, doesn't exist in Canada. So, we expect that that is going to be additive to our contractual rental growth opportunities. And rental growth-wise, again, as it is everywhere in our markets, at least, there's no widespread rental growth.

There are pockets of rental in Canada. We're seeing Calgary emerging as a market that is seeing the strongest rental growth, for example. There's growth suggests were seeing pockets of that in GTA and similar in Europe. We're seeing pockets of that in our current portfolio and in the U.K. Some markets are doing better than others. And we think that the markets that we're getting exposed to are going to outperform just given the lower starting point.

Your next question comes from Kyle Stanley with Desjardins.

So it was interesting to see the REIT be much more active with on-balance sheet acquisitions versus growth within the various JVs. So, I'm just curious, what's the driver of how that capital is being deployed? Just trying to understand, I guess, the strategic decision-making on how the capital is kind of invested across the various buckets at this point.

Well, we're trying to do both, Kyle. And timing-wise, it just so happened that we've been able to redeploy more capital on balance sheet, but there is a long and pretty active pipeline for our private ventures. We're just not in a position right now to announce any deals, but there's meaningful pipeline that we're pursuing in Canada across the private ventures. So we expect to do well for our own balance sheet program vis-a-vis hitting our deployment targets, and we expect to do well for our partners as well.

That makes sense. It was small, but within the DSI JV, there was the GTA West disposition and the pricing at roughly just over $500 a square foot. I was just curious what is the type of asset type of buyer, just thoughts on the value achieved. Just wondering, is that reflective of a shift in kind of the private market value of assets in the GTA West?

Just love your thoughts there. Strong pricing, thank you for picking that up. We like that price. It's a good asset. It has a fair bit of land. So older asset that sits on larger plot. And the value there is reflective of that. But also it's reflective of just strength of the private market overall for these kinds of assets. For assets that we own, strength of the user market. It's very consistent with the theme that we've been communicating over the past few quarters now.

And then just last one for me. You've given a lot of good color on the call so far, but how would you classify the kind of occupier or leasing environment today? Are you seeing elevated RFP activity? How has that maybe changed or not changed year-to-date?

It's regionally specific, Kyle, it's Gordon. But still Western Canada is strong. Tour activity has been strong. GTA, we're seeing increased activity. Where we take solace in and we've been quite optimistic on is our development opportunities. We've been seeing really good activity, RFP activity. We did a couple of big deals in Q2. So there's tours. The type of users that we're seeing is -- type of users that we're seeing are more touring around big box in the GTA, but we're seeing a lot of 3PL out in the market.

We're seeing some people in the trucking industry. Government is still quite active and then subsidiaries of government use, you're seeing contracts being announced regularly. We're seeing a lot of those subsidiary users out in the market as well too in the GTA. So it's been quite -- quite good activity. We've got a pretty robust pipeline, as I mentioned as well, about 35 active deals for about 2.5 million square feet to close out the year.

And just following up on that, that was the 35 active deals, that's on the wholly owned portfolio? Or is that everything in Canada?

That's on everything in Canada right now. The wholly owned portfolio makes up about 65% of that.

Your next question comes from Pammi Bir with RBC.

Just hopefully, a couple of quick ones for me. But just it doesn't seem like it, but I'm just curious if you could share any commentary on what impact any of these new tariffs or the ongoing tariff discussion or uncertainty there is having on any of the leasing velocity or time lines in Canada? And then as well if you're seeing any changes in the behavior in Europe as this conflict sort of continues to unfold.

Thanks, Pammi. We are not really seeing a change in behavior from occupiers over the last couple of months. Certainly have not seen any material change throughout the year. What we have seen, as Gordon suggested, is a meaningful pickup in activity in '26 over '25 so far. And we see that in our portfolio. We see that in the market stats that various brokerage houses put out. So that is continuing. The industries that are most affected by existing tariffs, newly contemplated tariffs are likely out of the market generally from a new leasing standpoint.

We're seeing those kind of industries tend to be renewing. As Gordon said, we're seeing higher retentions. We're seeing options getting exercised. So staying put is, in many cases, the decision that these businesses take. But they are already, from a new leasing standpoint, not in the market. And so any resolution there or any clarity will likely be positive to having these occupiers being back in the growth mode, but it's not affecting kind of the robust momentum that we're seeing already to date.

As far as Europe goes, we haven't seen sort of impact on leasing activity so far, where we're starting to see movements is construction costs. So construction costs could be under pressure upwards, and that likely means less supply or you need to achieve higher rents to justify supply. So that's something that we're watching across our markets. And we talked about inflation. Again, we don't -- we're not hoping for more inflation in Europe, but our portfolio has inflation protection built in, as you know.

And then just in terms of -- as you look maybe through the balance of the year or maybe even more so into 2027, are there any large known nonrenewals that you're anticipating from an occupancy standpoint?

Nothing large. There are obviously going to be some nonrenewals, but nothing that is going to be material.

And then just lastly, the leasing spreads, I think we were tracking lower than where we were through Q1. Was that just a function of the mix of what was rolling? And then how are you thinking about 2027 from a spread standpoint on the renewals?

Look, it really is a function of what's rolling. So we had relatively low rents rolling in the first quarter. And so that impacted the higher spreads, especially in Ontario. And we do provide kind of an outlook of where our expiring rents are by market in our MD&A, and we also disclosed where we believe average rents are. So on average, kind of you can model out kind of leasing spread. Again, it's primarily a function of expiring rent in any given quarter.

Your next question comes from Matt Kornack with National Bank Financial.

With regards to retention, just looking at Europe versus the Canadian portfolio, I mean, obviously, Spain had impact and to your point, the rents were low, so it didn't impact NOI as much. But it seems like you're just generally doing better on retention in the Canadian portfolio than Europe. Is there anything structural there? Or is it the type of tenant per asset? And should we expect those 2 to be kind of similar from a retention standpoint going forward?

The European portfolio just has a higher average tenant size than Canadian portfolio. So what that means is any given lease decision will be much more pronounced when you look at statistics such as occupancy or retention ratio. So we're not really drawing any conclusions there. Generally, we're seeing healthy retention ratios over time. Any given quarter, yes, there's going to be -- there will be swings. But when we look at that portfolio's performance over the last 5 years, retention ratio was pretty consistent in Europe to the Canadian portfolio. Any given quarter, you will just see more swings given the average tenant size, average unit size is larger.

Also Europe, and again, this is kind of new news and the climate is changing quickly everywhere. But there was an article today talking about the Rhine River being at like all-time lows and shipping is being impacted in Germany. Like is that something that you're seeing in terms of tenants or tenants have talked about. And I don't know if you can quantify your exposure or how you think about that, but just interested if anything has happened on the tenant front with regards to that avenue for transportation.

I haven't seen any impact so far, Matt, I think that we're watching on so far.

And then if we look at your market rent disclosure, you're at kind of around $10 in Western Canada, $16 in Ontario, Quebec, mid-13s. Can you give us a sense if today you were to build in those markets, what kind of rents you would need to make construction work? Just trying to get a sense once kind of existing supply has been soaked up where the natural gravitation would be in terms of where you can deliver rent into the market?

Well, it really is a function of product as well as it is a function of rents. So for larger bay product or kind of whether it's larger bay or the upper end of mid-box, what we see is we need to kind of see high teens in the market like Toronto to justify, call it, 18 plus, depending obviously on your land basis, whether you're buying land today, whether you bought land a long time ago, you bought land kind of maybe in 2021, '22 kind of time frame. But generally speaking, it's in that high teens range. In Western Canada, at the current rent levels, you can be solving to kind of low 6s in terms of development yield, which we think is on the lower end of what we would want to pursue.

We would want to push for as close to 7% as possible in Canadian context. So we think that there needs to be some rental growth to get there. And we are seeing that rental growth coming through. We're sort of seeing early signs of it. The Calgary market is pretty diverse from a product standpoint, and you see pretty significant variability in rents from one asset to another. And so when you're looking at headlines, this picture might be kind of misleading a little bit. You really need to look at every asset and look at what is available and what the asking rents are for each asset to then draw conclusions about rental growth.

Maybe last one for me. There's been some splashy announcements in Western Canada around the data center front. But can you give us a sense as to where you guys stand on that initiative? I know it's a bit of a chicken and the egg scenario, but any chickens or eggs out there?

Targeting both. As you know, our data center or our powered land portfolio is focused on the GTA at the moment. We have opportunities in other markets, including Calgary or Alberta broadly, including Quebec. But for now, we're focusing on a relatively small but meaningful -- relatively small number of assets with meaningful power in the GTA, was kind of in the 250-megawatt range across 3 sites. As we commented in our remarks, we're seeing more engagement from occupiers. We've responded to more RFPs in Q2 than we have throughout the entire 2025.

So, we're seeing more engagement, and we're advancing the work with various utilities to make that powered opportunity contractual. And we'll keep the market updated as we make progress.

Your next question comes from Tal Woolley with CIBC.

It's been a minute, obviously, since you raised the distribution last. I'm just wondering if you can talk a little bit about the deliberations on that front and what prompted the change? And Lenis, based on your sort of commentary, it sounds like investors might be able to expect a more frequent cadence of increase going forward.

Sure. Thanks, Tal. I mean, certainly, we've been building out all the various growth drivers in the business. Our FFO and comparative properties NOI growth has been very consistent and payout ratio has been reduced as well accordingly. So we're now in the low 60s, sort of trending in that low 60s to mid-60% FFO payout ratio. So, we've made a lot of progress in terms of the business itself. And just sort of given the confidence that we have in the outlook and the progress on the growth drivers, we just felt it was -- it's been several years since the last increase. So, we felt the business is at a point in time where it was -- we were ready to do that.

And I think we also communicated in terms of how we think about going forward is that we want to continue growing the cash flow that's retained in the business in that way for reinvesting in the business. And so we would look to any future increases to be at a rate that is inside of where we think that our FFO and free cash flow is growing.

But that's -- I would just say like just to be clear, like you're not committing to an annual cadence at this point, but it sounds like it's certainly possible.

Exactly. We're not saying it's going to be annual. I think we've got -- we've laid the groundwork and the outlook that it is certainly in the realm of consideration, but we're not committing to that. We want to, again, execute on the growth drivers and see that progress on the FFO and free cash flow growth. And it's always under consideration as well. So we'll continue on executing, and we'll see in 12 months from now.

And then just bigger picture, it's not really signaling any kind of change in investment -- like investors should not be reading any sort of change to investment strategy as a result of this. This should be sort of more viewed as like a catch-up after several years of not or sort of reorienting the business to its new model?

I wouldn't call it a catch-up, Tal. I think it's an evolution of the total return model. We think that growing dividend that is sustainable and that allows us to increase the retained cash flow is an important element of our total return model. While we're not committing to the annual, we've been laying the groundwork to be able to contemplate that as I suggested, and that's very much being contemplated. This increase is kind of a start of a new total return model that DIR is going to look to deliver to unitholders.

And then I can't remember if it was you or Gordon that made reference earlier to just some of the demand in Canada coming from the government. Do you know like the exact use there? I mean I think the presumption is that with all the pickup in defense spending that, that would be the prominent driver -- or the predominant driver, but maybe you can just offer a little bit more color on what they're looking for and why?

Tal, it's Gordon. There's kind of 3 buckets with the government activity that we're seeing. So, defense is definitely one of them. They're looking for secure warehousing and storage and some light manufacturing along major corridors across the TransCanada. The other group that we're seeing is we're seeing requests for some climate-controlled space with Health Canada, I think, is out looking on different requirements. And then we get some inquiries from groups that work with the tech services group of the federal government.

I believe they're called Shared Services Canada. There are some requests and groups that are doing contracts with them more around power procurement requests, getting a pulse on what buildings have -- what output for power and just a lot of inbound calls, not necessarily translating to RFPs or anything, but we are getting calls and inquiries on a variety of different uses. So we are seeing some activity from the government. And it's not just the federal government. The provincial government has also been relatively active in the GTA.

And just lastly, Lenis, yields have been bouncing around all over the place, but can you just talk a little bit about estimated borrowing costs right now in Canadian dollars and in the euro?

Sure. Yes. I think if we're looking at the 5-year part of the curve, we're seeing euro equivalent debt in and around 4% right now and Canadian equivalent probably in around 15-ish, 20-ish range. And yes, they have been bouncing around. So, we always try to be opportunistic when we can as well.

And at the margin, you're still preferring to swap to euros at this point in time?

Yes. Yes, we do. I think we -- our euro debt ratio is sort of in that low to mid-80% range. So we definitely have euro debt capacity. And it's still -- and all-in rates are still lower than Canadian and, as you know, to hedge some of the currency exposure.

[Operator Instructions] Your next question comes from Sam Damiani with TD Cowen.

I just wanted to clarify from, I guess, the question from 5 minutes ago or so, talk about the distribution. This is the first one in 13 years, but it almost sounded like it wasn't necessarily going to be a recurring one. I know you can't commit. But if FFO growth is mid- to upper single digits, is there anything preventing the REIT from raising the distribution by some portion of that growth?

Yes. Thank you for the follow-up, Sam. I just want to be clear. The short answer is no, there's nothing prevents us. And we've been building out the balance sheet of DIR over the last 5 years to have low leverage, have low payout ratio, growing FFO so that we could then get to a total return model that includes recurring distribution growth. It's very much what we are looking to do. It's not something that we're committing to do annually, but this is very much what we're looking to do.

And the governor for that will be growth in our free cash flow so that there is -- the growth that we're passing on to our unitholders is sustainable. And -- but the business continues to retain cash so we can reinvest and compound. So, I just want to be very clear on that. So thank you for the follow-up.

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

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

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

Welcome to the Dream Industrial REIT First Quarter Conference Call for Wednesday, May 6, 2026. [Operator Instructions] And the conference is being recorded. [Operator Instructions].

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 at www.dreamindustrialreit.ca.

Your host for today will be Mr. Alexander Sannikov, CEO of Dream Industrial REIT. Mr. Sannikov, please proceed.

Thank you. Good morning, everyone. Thank you for joining us today for Dream Industrial REIT's First Quarter 2026 Conference Call.

Here with me today is Gord Wadley, our Chief Operating Officer; and Lenis Quan, our Chief Financial Officer.

We started off 2026 with strong momentum, and we saw that reflected in our solid operating and financial results. While geopolitical uncertainty and trade tensions persist, the industrial sector continues to demonstrate broad resilience and the execution on our core pillars is translating into tangible results across the business. The occupier markets in Canada are strengthening, and we are seeing continued absorption not only for small- and mid-bay units, which we have observed for some time, but also more recently in large-bay format.

We're also encouraged by the activity in the European portfolio and are seeing robust occupier dynamics for infill mid-bay assets and multi-tenant light industrial properties. These occupier dynamics inform our operating results as well as our capital allocation decisions.

For the quarter, we delivered 9% year-over-year comparative properties NOI growth, driven by healthy leasing activity, leasing spreads, strong occupancy and tenant retention. This strong pace of organic growth drove FFO to CAD 0.26 per unit, in line with our expectations and outlook we communicated last quarter. Most notably, our FFO per unit continued to grow year-over-year, even though we completed the disposition of the first tranche of assets to the DCI JV and used the proceeds to temporarily pay down debt. This gives us the opportunity to redeploy the capital towards our strategic growth initiatives.

We are on track with the capital allocation plan we outlined at the beginning of the year. So far this year, we have returned nearly CAD 100 million of capital to unitholders through NCIB activity. This activity is consistent with the targets we communicated when we announced the formation of the DCI JV.

We also have a robust pipeline of acquisitions for DIR's on-balance sheet program with over CAD 500 million of opportunities in Canada and in Europe in exclusive negotiations and in various stages of due diligence. Over 85% of this pipeline is comprised of income-producing assets with a going-in cap rate of just over 6% and a mark-to-market cap rate of over 7%.

We're also evaluating adding compelling development opportunities in our target markets for small- and mid-bay industrial assets at a yield on cost of just under 8%. Our existing development program is progressing well. This quarter, we achieved substantial completion over 125,000 square foot build-to-suit expansion in the Netherlands that is already contributing over CAD 1.7 million of NOI on an annualized run rate basis.

Our Strategic Private Ventures segment continues to provide us with a competitive edge, supporting the growth of our operating platform and revenue growth. So far this year, we closed on approximately CAD 130 million of acquisitions within our private JVs, including DCI JV's first acquisition beyond the initial portfolio. We have another CAD 250 million of acquisitions in exclusive negotiations for the account of our private ventures.

Lastly, our power procurement program is also advancing. Our solar portfolio is expanding with multiple projects under construction, including a pilot project that includes a battery storage solution. Our near- to medium-term pipeline stands at over CAD 140 million with a target yield on cost of over 8%.

On the data center initiative, we are in advanced stages of securing commitments on over 260 megawatts of power in the GTA with phased delivery over the next two to five years. Concurrently, we're exploring opportunities to realize this progress on power procurement through joint ventures, development or dispositions. Put together, we are encouraged by the progress we are making across the key drivers of the business.

With that, I will now turn it over to Gord to discuss our operational highlights.

Thank you, Alex. Stepping back, we continue to see the Canadian industrial market hold up well from a macro perspective. While uncertainty has extended decision-making timelines in pockets of the market, Dream Industrial continues to perform well, as demand for well-located functional urban logistics spaces remains resilient and the new supply pipeline continues to moderate.

On occupancy, we saw a meaningful improvement in Canada. Committed occupancy was 96.8%, up from 94.4% a year ago, driven by small-bay lease-up and recent development completions. Overall, committed occupancy across the total portfolio was 95.7%. Against that backdrop, we are encouraged by the operating results. We signed 1.8 million square feet of new leases and renewals, delivering a weighted average rental spread of 26.4% over expiring rents. The regional mix was approximately 1.4 million square feet in Canada at 33.1% average spreads and about 400,000 square feet in Europe.

In Toronto and the broader GTA, demand continues to be the most pronounced for well-located functional space, particularly in small- and mid-bay. As Alex mentioned, over the past couple of quarters, we've seen meaningful absorption of larger units. Based on the pipeline we see, we expect this trend to continue in 2026.

The improvement in absorption and the pace of leasing activity is resulting in stable to improving net effective rents and a shrinking gap between achieved rents and asking rents. In our portfolio, we saw a healthy retention and strong mark-to-market on near-term rollover, and leasing economics remain disciplined with stable incentives. Ontario comparative properties NOI grew 6.8% year-over-year.

Fundamentals in Western Canada are robust with low vacancies, solid demand and demographic trends. We're observing continued rental growth. With our Balzac 20 development coming online and the lease-up of several vacancies in Calgary, we transacted approximately 0.5 million square feet across our platform during the quarter and saw a 100 basis point lift in occupancy.

Western Canada comparative properties NOI grew 8.5% year-over-year. In Montréal, the market ultimately fared better than most expectations. While asking rents have moved down across the market, our achieved rents have remained higher, reflecting the quality and location of our portfolio and strong demand for well-functioning space. With the lease-up of small-bay vacancies, our Québec occupancy improved, and Québec comparative properties NOI increased 31.1% year-over-year.

Looking ahead, our leasing pipeline in Canada remains healthy. We have over a dozen new deals in advanced negotiations, totaling over 700,000 square feet. Decision-making timelines are longer than average, but our customers and prospective occupiers are showing resiliency and remain committed to their space requirements despite geopolitical uncertainty. Many of them are expanding organically and renewing to longer-term commitments in advance of the expiry.

Further evidence of this is that we had 1.9 million square feet of remaining uncommitted expiries in 2026 as of Q1. We've already secured approximately 0.5 million square feet at an average spread of 38.2%, and we are in advanced renewal discussions on the balance. We expect that the retention ratio for the year will be consistent with our long-term average. In addition, we expect leasing spreads on our remaining 2026 rollovers in Canada to be in line with our Q1 results.

Over in Europe, the industrial sector remains supported by durable structural demand drivers. As inflation is likely to ramp up, our portfolio remains relatively insulated as the majority of our leases are indexed to CPI. At the portfolio level, European occupancy was modestly impacted this quarter due to the acquisition of a vacant value-add asset in the Netherlands, which had approximately 80 basis point impact. We acquired this asset for its prime location and strong physical attributes and see meaningful value creation potential through planned upgrades, with lease-up expected by the end of the year and a stabilized cap rate of approximately 8%.

Committed occupancy in Europe was 95% this quarter, and overall performance remained consistent with our expectations with 4.9% comparative properties NOI growth. Over the next few quarters, we expect to see some transitory vacancies in Spain. However, given the underlying strength of the market, we're confident in re-leasing prospects. Overall, our occupancy and NOI outlook for the business remain intact.

Thank you. And I'll now turn it over to Lenis to discuss our financial highlights.

Thank you, Gord. Our portfolio delivered comparative properties NOI growth of 9% for the quarter. The strong pace of organic growth allowed us to absorb a higher average cost of debt and to operate at lower leverage following the first tranche of asset sales to the DCI JV while continuing to deliver FFO growth.

We delivered diluted FFO per unit of CAD 0.26 for the first quarter, 2% higher than the prior year quarter. In addition, the lease-up of newly completed developments and property management income generated from our private ventures platform also contributed to our overall FFO growth. Our net asset value at quarter end was CAD 16.76 per unit, up from CAD 16.60 last quarter, reflecting stable investment property values and the impact of our NCIB activity.

The proceeds from the first tranche of asset sales to the DCI venture in early February were used to repay most of the outstanding balance on our credit facility. Consistent with the capital redeployment plan that we communicated in late 2025, we have completed CAD 97.2 million of unit buybacks through our NCIB program to date in 2026 at an average price of CAD 12.95 per unit. We expect the second tranche of asset sales to the DCI venture to close in mid-2026, with proceeds used to temporarily repay our credit facility until it is redeployed accretively.

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 the quarter with leverage at 36.8%, which was 160 basis points lower than year-end 2025. Our net debt-to-EBITDA ratio was 7.3x. As we deploy our available balance sheet capacity, we expect leverage to remain in the targeted mid- to high-30% range and our net debt-to-EBITDA on a run rate basis to trend back towards the mid-7x range.

Subsequent to the quarter, we repaid our CAD 200 million Series E debentures that matured on April 13, 2026, by temporarily drawing on our credit facility. On April 21, we closed on the issuance of our CAD 200 million Series H unsecured debentures at an all-in rate of 4% after swapping the proceeds to euros. The proceeds were used to repay the outstanding balance on our credit facility.

We retain over CAD 600 million in total available liquidity. Combined with the growing cash flow generated by the business, we are well positioned to fund our strategic initiatives, including our development pipeline, power procurement program and contributing to our private ventures.

Our first quarter performance demonstrates the strength of our business, and we remain confident in our growth trajectory for the balance of the year. We reiterate our previously issued outlook across our key metrics, which as a reminder were for the full year 2026 average in-place occupancy stable in the high-94% to low-96% range; for the first half of 2026, comparative properties NOI growth relatively consistent with our Q4 2025 growth rate; for the full year, dependent on the timing of leasing, 2026 comparative properties NOI growth stronger than full year 2025 growth, which was 5.7%; and full year 2026 FFO per unit between CAD 1.08 to CAD 1.10.

With the deployment of proceeds from the second tranche sale to the DCI venture expected to be weighted towards the middle and second half of this year, we expect our quarterly FFO per unit run rate to accelerate accordingly. Our FFO growth expectation is predicated on current foreign exchange rates and interest rate expectations.

I will turn it back to Alex to wrap up.

Thank you, Lenis. Dream Industrial's business is anchored by a functional high-quality urban portfolio, supported by a diverse occupier base and increasingly meaningful new revenue streams. Together with the scale of our operating platform, this positions the business well for continued growth, and we expect to continue delivering strong results for our unitholders.

We will now open it up for questions.

Your first question comes from the line of Mark Rothschild from Canaccord Genuity.

Alex, you made some comments about being encouraged by some things in Europe. Can you just talk about what's driving that improvement? And do you think that that's something we should see in better leasing spreads? And maybe just connected to that, is that connected at all to your confidence in buying a property that's vacant? And if you could just expand more on what the timeline is for expected stabilization of that asset?

We continue to observe the strength from mid-bay infill industrial in core Western Europe and Netherlands and Germany. These are assets that are located in close proximity to major population centers such as Randstad, Ruhr region, et cetera.

And this strength is not new. We've seen that throughout 2025. You see that in our operating results, and we see that translate into continued -- our continued ability to push rents beyond business plan, and we are seeing kind of these data points in our everyday leasing.

When it comes to buying a vacant property, again, this is not new. So if you recall, last year, we bought an asset that was vacant in the Netherlands. We stabilized that within two months of ownership at yields that exceeded our underwriting. And this asset is in a different submarket in the Netherlands, but it's a submarket that's equally strong and the physical attributes of the assets are robust as well, and we are pretty confident in our ability to lease this asset at yields that Gord quoted.

Your next question comes from the line of Sam Damiani from TD Cowen.

Great to see the outlook reiterated in full there. As you go out into 2027, I know it's early days, but any comments you can share in terms of target leverage level that you'd be running -- wanting to run the REIT at post sort of redeployment of the proceeds of the sale into the DCI JV?

I think we communicated that we would -- as we redeploy the proceeds that we expected on a net debt-to-EBITDA basis that we would trend towards the mid-7s, and that would be happening by the end of the year. And it will -- and I think we would see that as we grow our EBITDA, you're going to see that trend downwards into 2027.

That's helpful. And I guess, just looking at the data center sort of disclosure update there, I wonder if you could clarify, with the megawatts for the three sites totaling 260 megawatts, what is the REIT's sort of net ownership in that 260 and also the net ownership and the remaining 350 megawatts-or-so beyond that that you've identified?

Thank you, Sam, for that follow-up. The vast majority of the 260 is on REIT's balance sheet. There's only one asset for about 15-megawatt capacity that's in the JV. Of the 600, again, the majority is in the REIT's wholly owned portfolio.

Okay, great. Maybe just one last quick one. I mean market rents seem to be stable. Alex, you've spoken fairly confidently about the trajectory sort of evolving over the coming quarters. Has anything changed in your outlook sort of, if you will, three months later?

So far, Sam, we're seeing data points that support the outlook of market rents -- broader market rent growth in Canada resuming in second half of 2026. Again, we're seeing evidence of that happening already in the West, seeing pockets of that happening in the GTA, more -- less on the asking rents, but more on the achieved rents. And we hope that as we continue the pace of absorption coming through that this is going to come through in the headline metrics that many market participants are focusing on.

The next question comes from the line of Brad Sturges from Raymond James.

Just looking at the Cambridge and Whitby projects, I think you noted that you're in active discussions for 500,000 square feet there. Just curious how far along would those potential discussions be? And do you have any line of sight, I guess, of, if the leases were executed, where and when occupancy and maybe rent payments could commence?

So for one of the properties, we're in the LOI stage with a couple of prospective tenants. And the other one, we're seeing some good interest through tours.

Okay. So I'll call it early days still. In terms of -- since you're progressing towards closing the second tranche on the CPP JV, and I'm sure the focus is on that for now, but I guess, what would be the appetite from CPP, from your point of view, in terms of expanding that JV beyond what's been committed to date?

Just wanted to go back to the previous question on your takeaways there. It's a bit more advanced than sort of initial stages just on the leasing inquiries.

Just switching gears to the second question, look, as we commented in our prepared remarks, we've acquired already our first asset with the DCI JV from the market. We have a good pipeline of additional assets that we're evaluating. As far as [ expanding ] in assets into that JV from a balance sheet, there's no active discussion. But as we've always commented with respect to our private ventures generally, opportunity to have a dialogue is always there if it's strategic for both parties.

I appreciate the clarification there, Alex. So I guess this is more a little bit too early to comment beyond what you just provided there on the leasing front. Is that a...

Correct.

Perfect. And then just any update, I guess, on the European JV opportunity? I know you've been working towards that, but if there's anything new you'd like to share at this point?

Nothing that we can share at this point. We're making progress there, and as that advances, we'll provide an update, but nothing imminently to comment on. Again, just to reiterate, formation of a European JV will be part of build-out of our private -- strategic private venture business, which is going to be in addition to all the ventures and over capital partnership that we have today.

So when we communicate our outlook for 2026 or 2027, and I believe when broadly market is modeling our business, these additional growth drivers are not -- certainly not in our outlook. We don't believe that they're in the broader market's outlook. So this is all going to be in addition to what we currently have in front of us.

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

Maybe just going back to the kind of reiteration of the outlook year. Obviously, a very strong quarter in Q1 with the 9% same-property NOI growth. For the first half of the year, you've kind of highlighted maybe roughly above 8% and maybe in the 6-ish percent range on the full year. Just wondering, given the strong start to the year, why you maybe see that slowing into the balance of the year to kind of hit that lower full year guidance number?

You're correct in your observations. I think as we progress through the year, there's a significant amount of leasing that is still assumed and forecasted to happen. So certainly, as we progress through the year and those are committed, we will revisit the guidance or the outlook of the company.

Okay. That's fair. And then I think it was in the prepared remarks, a leasing pipeline of roughly 700,000 square feet. Would that be a combination of new and renewals?

It is, Kyle. It's a combination of both, more for new deals, though. It's more skewed towards new deals.

And then just turning over to kind of your leasing spread this quarter. Obviously, the 66% spread in Ontario, highest it's been in a little while, really good to see that occurring. What's the driver there? Is it strength in the market? Is it just a mix of leases turning? I'd just love to understand what drove the increase again.

As Sam observed in his question, the market rents have remained relatively steady in our disclosure in this quarter. So we haven't seen dramatic changes in market rents. The spreads are really informed by the composition of space rolling and the quality of the space that is rolling. That's what drove the spread. The market rent situation in our portfolio didn't change dramatically.

Okay. Fair enough. And then just last one from me, in your leasing discussions today, is there a premium for sites that have elevated existing power capacity? Just trying to think through that maybe there is a higher and better use for what traditionally would have been an industrial facility transitioning towards data center. So I'm just wondering if that's something that's happening in your leasing discussions where you have an ability to ask for higher rent, given an existing higher power capacity?

What we're seeing in that regard is it doesn't necessarily drive data center demand, but it drives a broader demand from a more diverse pool of occupiers, including defense occupiers, are attracted to higher levels of industrial power. In certain cases, having higher level of power makes it easier to kind of convert a site for data centers, but it's less of a driver in the day-to-day leasing. It's mostly just appealing to a broader range of occupiers.

And certainly, when you have more demand for the space, that sort of indirectly creates upward pressure on rents.

The next question comes from the line of Himanshu Gupta from Scotiabank.

So you mentioned around CAD 500 million of acquisitions under exclusive negotiations. Can you elaborate like which markets, quality of assets or timeline? And then also, how much is on the balance sheet versus on the joint venture?

Thanks, Himanshu. So just to kind of reiterate, so CAD 500 million is on balance sheet. We have another CAD 250 million in exclusive negotiations for the joint ventures. So that's CAD 250 million in addition to the CAD 500 million. It's not part of the CAD 500 million.

As far as the on-balance sheet assets, we are looking at a product that is very consistent with what you've seen from Dream Industrial. So these are mid-bay assets predominantly in core locations in Canada, in Europe, in markets that we've talked about with our unitholders over the past few years. Going-in cap rate is just around 6% with mark-to-market potential that takes us to over 7%. And included in that is some development opportunities for small- and mid-bay assets at a yield on cost of around 8%.

CAD 500 million all on balance sheet. And in terms of timeline, like Q2, Q3 or over the rest of the year?

Some are going to be closing over the next couple of months, and we'll see probably most of them closing kind of in around second half and more likely towards Q3, but timing is not exactly certain.

Got it. And sorry, the mix between Canada and Europe, I mean, I think you mentioned kind of both regions. Is the preference here Canada versus Europe?

We have some acquisitions in Canada. A significant chunk of the pipeline is in Europe. As we also communicated in our broader capital allocation outlook at the beginning of the year, we're seeing more of a pipeline in Europe. So not the entire pipeline is in Europe, but a significant chunk is in Europe.

And then maybe just a follow-up there. I mean, obviously, quite a bit of acquisitions here in the market. There for, are you seeing like a change in valuation trends or cap rate compared to six months or one year?

Nothing material. We're seeing -- around the edges, there's possibility of that, but we haven't seen material changes over the last six months. There are competing forces at play. We've seen, obviously, interest rates impact some occupier -- some buyers' underwriting. On the other hand, we've seen more capital, generally looking for industrial opportunity, both in Canada and in Europe. And so these -- they are competing forces at play. And as a result, we haven't seen material changes on cap rates.

And maybe I should clarify, more on the Europe side, I mean, given the geopolitics and all, still nothing -- no change in trends in Europe so far?

We haven't seen material changes in trends in Europe so far.

Your next question comes from the line of Fred Blondeau from Green Street.

Just one question from me. Focusing on the GTA, I was wondering, given the extended leasing timelines, can you comment on how much free rents are recorded to attract tenants today? And how this quantum of free rent may have changed over the last -- call it, over the last 12, 18 months?

Thank you, Fred. We have seen free rent stabilizing. We haven't seen free rent increasing over the last couple of quarters. If anything, we're starting to see trends that support kind of -- or point of incentives generally declining and free rent as part of that declining marginally. Usually, we're talking on the new leads about a couple of months of free rent on a five-year deal.

And in the context of a renewal, this is highly bespoke. It ranges from no free rent to, again, maybe a couple of months of free rent, depending on the circumstances. Overall, as we said, we've seen NERs improving in the GTA on a year-over-year basis, and that is a function of stronger absorption and declining vacancy rates.

A couple of months, that would be less than six months, of course, right?

Sorry. Fred, can you repeat that?

Yes. I was just saying, when you say a couple of months, that would be less than six months, of course, correct?

Less than 6 months, correct yes.

Your next question comes from the line of Tal Woolley from CIBC.

Just wondering, can you characterize like the industries or tenant types where you're seeing kind of like the best interest and demand right now?

It's Gord. We're seeing the bulk of our tours from various 3PLs in the market. Alex touched on defense. We're seeing more interest from federal government and Crown corps as well, too, taking stock of our inventory. So we've been taking a lot of questions from them, but the bulk of our tours have been predominantly from 3PLs in the market.

And we're just -- we're starting to see with the price of oil having shot up here, although fingers crossed, of retreating. We've seen some pressure on a lot of transportation companies, whether it's airlines, freighters, that kind of stuff. Any concerns on the tenant side just as we enter into sort of an era of higher oil prices?

Very topical question, Tal. We are in conversations with a lot of our occupiers about how this impacts their business. What we have observed is that the pace of activity didn't really change over the last couple of months, as we've seen oil prices increase, and that is informing our resiliency commentary. In this environment, closer in locations do become much more relevant to these occupiers to save on freight, which is very consistent with the thesis we've been articulating over the last few years about urban industrial, and that is, again, playing out right now.

And then lastly, you talked a lot on the call here about types of assets you might be interested in. I'm just wondering where they're coming from and have public -- we haven't really seen a lot of like -- a lot of take-privates in the public space, but I'm just wondering, given where some of the industrial REITs are trading globally, are you seeing opportunities to approach some of these companies looking for either individual assets or portfolios?

Thanks for this follow-up. Look, we see a broad range of vendors out there in the market. There's all sorts of drivers that lead to potential transactions, finalization of business plans and the fund life, broader capital recycling. So we're pretty happy with the pipeline that we have in front of us. There's lots to execute on. And we'll always look for off-market opportunities, whether it's with the groups that you just summarized or with others. We continue to look for those opportunities across our target markets.

[Operator Instructions] Your next question comes from Matt Kornack from National Bank Capital Markets.

Just looking at third-party stats, Toronto or the GTA, I should say, seems to be getting the lion's share of absorption. Can you give us a sense as to why this market in particular is doing so well? And then maybe on the other side, Montréal, it seems like you're outperforming the market. So how are you kind of winning away tenants maybe from others or getting new tenants in the market?

Maybe starting with Montréal, our portfolio in Montréal is predominantly small- and mid-bay. And that segment of the market is healthy in Montréal. We're seeing rents in the mid-teens, escalators kind of on either end of 3%. And that is -- that theme is consistent, and we haven't seen sort of a material change in that theme over the last couple of years. And it is continuing into 2026, and that is what's driving our results.

When it comes to the GTA market, look, it's the largest market in the country and the most diverse market in the country. And we have obviously seen a bit of a pause in the GTA. As interest rates spiked in 2023, inflation spike, there was a lot of occupiers in the GTA market that were, let's say, on pause with their expansion needs and some occupiers who took more space than they needed in 2021-2022.

So that space came back to the market. We saw a bit of a supply delivery in 2024. And what we're seeing now is that the pent-up demand is coming through, and there's gradual absorption of that new supply, including in the big boxes, which is encouraging. Again, that's not a significant part of our business, but it's encouraging to see.

Maybe looking south of the border as well, I mean, there's increasing confidence, I think, in the U.S. around guys taking space in large amounts. Do you think there's -- you mentioned the hesitancy. Do you think we need to get past kind of USMCA negotiations at least to have a little bit of certainty before you see that flood of interest appear maybe on a broader basis? Or are you having those discussions around trade with your tenants at this point?

There's very few discussions with our occupiers that were kind of centered around trade at the moment, including renegotiations of USMCA. So we haven't seen that impact on occupier sentiment. As to whether there's added demand, should there be more certainty around USMCA, it's likely the case, but we don't really have empirical evidence to sort of support that claim. It seems right, but it remains to be seen. If anything, it's going to be net-net additive to what we're seeing already.

Then maybe just lastly, in terms of, again, the sense of urgency as Toronto and other markets kind of see availability peak here, do you think that inspires guys to make decisions in advance of kind of supply maybe becoming more constrained here as we would expect, given kind of normal absorption levels in the Toronto and other markets?

Yes, you're referring to occupiers moving faster?

Yes. I'm just trying to get in ahead of potentially a tightening market.

Look, that's a possibility. We're already seeing some of that with some occupiers where occupiers are looking to blend and extend and/or secure early renewals for 2027 in -- well, 2027 onwards lease expiries, and in many cases, asking for longer lease terms.

Your final question comes from the line of Pammi Bir from RBC Capital Markets.

Maybe just coming back to Matt's question, trying to reconcile the comments earlier about extended lease timelines, I think, that was made in the opening remarks versus some tenants looking to do some early renewals to blend and extend. Can you just clarify that? Like is it taking longer to get these deals done or not really?

It's taking longer to get new lease deals done, so to fill vacancy or new developments taking still longer. We -- to give you an example, some of the LOIs that Gord referred to, we've been in discussions with this group for close to six months and under -- and this is not new. We commented on that last quarter and probably the quarter before. Now normal timelines would be half of that. So the decision timeline for new space -- for new leases are still longer.

At the same time, retention ratios are consistently high because still occupiers are looking to stay in place. And some of them may feel that now is a good time in the market, going back to Matt's comment and question, to secure space for longer, given the supply pipeline in the GTA broadly is declining and market is looking like it's turning the corner from an occupier standpoint. So some occupiers are thinking about securing renewals for longer.

Okay. Got it. And then just, again, maybe sticking with that theme, for the extended timelines on new deals, is this more skewed to Canada? Or have you seen that start to play out in Europe as well or maybe it already was, I guess?

Generally, it would be skewed to Canada. In Europe, we haven't seen sort of changes to new leasing timelines dramatically. For bigger boxes, the timelines have been relatively long for a couple of years, and that didn't really change up or down. And again, small- and mid-boxes, we're seeing pretty solid pace of demand.

Okay. And then just in terms of the -- I guess, the capital coming back for the DCI JV transaction, you've been obviously pretty active on the NCIB. You're at the low end of your, I guess, CAD 100 million to CAD 200 million initial target. How are you feeling about additional buybacks at this stage? Or is the thinking maybe perhaps to keep more dry powder for that pipeline of acquisitions you cited?

So look, we'll evaluate. Obviously, the NCIB activity will be a function of the unit price accretion to FFO and NAV that we achieved from NCIB relative to opportunities that we see on the acquisition side. So we'll continuously evaluate this as we see movements in the unit price and as we compare that to the acquisition of opportunities in front of us.

Got it. Okay. And then just the last one. On, I guess, the first tranche of assets that were sold in the quarter to that JV, was the pricing or the cap rate on that pretty much in line with the overall portfolio, or was there much of a difference?

The cap rate on the second tranche would be a bit lower overall. And obviously, we'll provide the details as we close the tranche, but it's going to be a bit lower than the first tranche. The cap rate overall is in line with what we quoted. Obviously, that's the metric that is the most relevant. And how it's broken out by tranche is informed by -- or the cap rate by tranche is informed by occupancy primarily of the assets that are in each tranche.

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

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

This brings today's meeting to a close. You may now disconnect.

Hello. Welcome to the Dream Industrial REIT Fourth Quarter Conference Call for Wednesday, February 18, 2026. [Operator Instructions] And the conference is being recorded. [Operator Instructions]

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 and risks and uncertainties and 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 at www.dreamindustrialreit.ca.

Your host for today will be Mr. Alexander Sannikov, CEO of Dream Industrial REIT.

Mr. Sannikov, please proceed.

Thank you. Good morning, everyone. Thank you for joining us today for Dream Industrial REIT's year-end 2025 Conference Call. Here with me today is Gord Wadley, our recently appointed Chief Operating Officer, who we are happy to welcome to the industrial team and Lenis Quan, our Chief Financial Officer.

2025 was characterized by significant volatility and unprecedented changes to the global trade environment. Despite this volatility, our results once again demonstrated the resilience of our business. In 2025, we delivered FFO per unit of $1.05, a 5% increase year-over-year. Our average in-place rent increased by 8%, driving comparative properties NOI growth of approximately 6% for the full year.

After a turbulent start of 2025, the leasing environment strengthened towards the second half of the year. We have seen a solid uptick in leasing velocity across our key markets, translating into positive absorption and stabilization of asking rents. Across our platform, we signed over 10 million square feet of leases at 30% spreads during the year, including 1.2 million square feet of development leasing. We ended the year with in-place and committed occupancy of 96.2% and a healthy tenant retention ratio of approximately 70%.

Over the past few years, we have successfully captured meaningful upside embedded within our portfolio. There is still significant mark-to-market opportunity in the next 2 to 3 years, especially in our Canadian portfolio. In addition, we expect market rent growth to resume in the second half of 2026 and into 2027, following over 2 years of muted market rent development. During this time, we worked diligently to enhance our business by adding strong ancillary revenue drivers complementing our core operations and allowing us to continue driving FFO and cash flow growth irrespective of the amount of upward pressure on market rents.

Our solar and our private capital business are the most established within our portfolio of ancillary revenue opportunities. These businesses continue to see healthy growth trajectory, significantly outpacing the growth rates in our core business and are already meaningfully contributing to our FFO and cash flow. Through the execution of these levers, we have significantly grown our free cash flow and meaningfully reduce our payout ratio over the last 5 years. In addition to deploying the retained cash flow, we are actively recycling capital to enhance our return profile further.

During the year, we completed or firmed up on over $850 million of dispositions at premium to our IFRS values, including the formation of the DCI joint venture with CPP Investments. The first tranche of the recapitalization of our 3.6 million square foot portfolio by the DCI JV closed in early February, resulting in estimated net proceeds of $375 million. The opportunity offering -- the deployment opportunities offering the strongest risk-adjusted returns within our investable universe are all unique to our business and include our intensification program, activation of our land bank, solar and co-investments in our private partnerships. Beyond these opportunities, we're looking to deploy our capital into selective unit buybacks and accretive acquisitions.

Our on-balance sheet acquisition pipeline is robust with over $350 million of opportunities currently in exclusive negotiations. These are mid-day infill assets in our core existing markets with growing in cap rates on these assets is just below 6% on average, and there's strong reversion opportunity translating into mark-to-market cap rate in the mid-7% range. As we deploy the proceeds from already completed and firmed dispositions. We intend to continue recycling capital out of nonstrategic assets into our core strategy, focusing on urban infill midday assets and selective new development that benefit from structural demand tailwinds.

Looking ahead, while we recognize that the geopolitical uncertainty and trade tensions will continue to persist in 2026, our key growth drivers remain firmly intact. We are encouraged by the operational tailwinds, a strong access to capital and attractive deployment opportunities, all underpinned by a solid balance sheet.

With now, I will turn it over to Gord to discuss our operational highlights.

That's great. Thank you very much for the introduction, Alex. It's really good to be with you all again today and share firsthand some of the great work our team is doing across the platform. I'm really looking forward to executing on the robust opportunity set within the industrial business. Our portfolio continues to generate very stable and consistent cash flow growth, which is a testament not just to the quality and location of our assets but also the leasing and operating teams we have in each region that ensure we are achieving our goals.

In the fourth quarter, just from a macro perspective, the Canadian industrial leasing market continued to stabilize with 6 million square feet of net absorption recorded during the quarter. This represents the strongest pace of absorption in the last 12 quarters. Combine this with a shrinking supply pipeline and a transition to more build-to-suit developments, the outlook for fundamentals has improved across most of our operating regions.

Across our specific occupier markets, we continue to observe sustained demand for our assets in core urban locations. Since the beginning of October, we've completed over 2.1 million square feet of leasing at an average rental spread of 14.3%, bringing year-to-date leasing to a very strong 7.4 million square feet at an average spread of 19.6%. This directly underscores the embedded mark-to-market opportunities across our portfolio.

As Alex pointed out earlier, we're very encouraged by the recent leasing trends across key markets. Starting with the GTA. This market continues to lead the country in terms of absorption and leasing momentum. We recorded one of the strongest quarters of net absorption in 2025 in the region. This was driven in large part by solid demand across small and mid-bay product and improving activity in larger format space. I'm quite pleased to share that our team did approximately 2.5 million square feet of leasing in this market across the platform over the course of 2025 alone and approximately 610,000 square feet in Q4 with a rental rate spread of 58%. We're also seeing significant new requirements in the market that have been waiting on the sidelines since the normalization process in 2024.

Based on recent market research from major brokerage houses, there's been over 40 million square feet of active industrial requirements across Canada. When you look at markets such as Calgary and Vancouver, active requirements significantly outpaced current availability in that market and account for 40% of current availability in the GTA.

In Quebec, I wanted to touch on that small and mid-day leasing supported modest occupancy gains in Q4 2025, driven by the lease up of smaller vacancies. While elevated sublease availability and excess large bay inventory continued to weigh on overall market conditions, pushing the overall vacancy rate to just under 6%. Despite these near-term headwinds, demand for very well-located and functional mid-bay space remains quite healthy, especially for on-island product, with small to mid-bay availability stabilizing in low to mid-single-digit range. Good renewal activity, strong tenant relations and steady absorption has allowed our team to maintain occupancy and capture rental growth where conditions support it.

A great example that I want to draw everyone's attention to of this momentum is our 366,000 square foot asset in Montreal, where we successfully regeared the entire building occupied by 3 tenants to market rents. These renewals were completed at starting rental rates of $13 to $14, with average annual escalations of 3%, achieving a spread of over 70% compared to prior rents. Notably, we also regeared 137,000 square foot lease within the building 5 years sooner and did better than expectations.

In Western Canada, leasing conditions remain very strong. During the fourth quarter, we transacted over 800,000 square feet. Calgary and Edmonton benefited from solid renewal and backfill activity and leasing spreads since October have averaged to high teens. At our Balzak 20 development, we completed 20 new leases during the quarter, achieving full lease-up at rents in the mid-$10 per square foot range, with approximately 3% annual steps. This commences in early 2026. We also stabilized our Balzak 50 development through a 245,000 square foot lease at starting rents of $9.75 per square foot with escalations of about 2.5%. These 2 marquee developments in Calgary are now 100% leased and expected annual NOI contribution of over $10 million.

The strong leasing performance highlights sustained industrial demand for the Calgary region and reinforces our strategy of delivering modern, well-located logistics assets to meet the need of national and global occupiers.

In Europe, we're also observing very robust leasing activity. The leasing market has been somewhat less impacted by tariffs in 2025, and we have continued to see very resilient fundamentals with new demand drivers for industrial space such as defense and nearshoring becoming more prominent. Availability has stabilized in the low mid- to single-digit range and is trending downwards with increasing take-up and declining supply.

Our team expect market rent growth across our core markets in the Netherlands and Germany to outpace inflation in the very near term. To date, we've already addressed over 40% of our 2026 expiries. And since the start of 2026, we have signed or advanced negotiations on over 1.3 million square feet of space, positioning us very well as we move throughout the year.

I will now turn it over to my friend, Lenis to discuss the financial highlights. Thank you.

Thanks, Gord. We are pleased with our 2025 financial performance as our business continues to deliver stable and consistent growth. Despite slower leasing of existing vacancies amid tariff-related disruptions that affected roughly 1/3 of the early part of 2025, our portfolio delivered solid cost comparative property NOI growth of 8.4% for the quarter and 5.7% for the year. This strong organic growth allowed us to absorb higher cost of refinancing and also the impact of early refinancing over $500 million of low-cost debt in 2025.

We delivered diluted FFO per unit of $0.27 for the fourth quarter, 5.3% higher than the prior year quarter. For the full year, diluted FFO per unit was $1.05, representing a 4.9% increase year-over-year. Our net asset value at year-end was $16.60 per unit, reflecting stable investment property value. The slight quarter-over-quarter decrease in NAV primarily reflects transaction costs largely the incentive fee payable on the gain realized with the sale of the initial assets into the new DCI venture with CPP Investments.

During the fourth quarter, DBRS upgraded our credit rating to BBB high with stable trends. Following the upgrade, we secured interest rate savings on our various corporate bank unsecured facilities, which represent approximately $0.05 on FFO per unit 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 successfully addressed all of our 2025 debt maturities. We repaid the maturing Series A debentures in December by temporarily drawing on our credit facility and ended 2025 with leverage in our target range and with a net debt-to-EBITDA ratio of 7.9x. In early February, we repaid the majority of the balance on our credit facility following the closing of the first tranche of asset sales to the DCI venture.

Over the next few quarters, we expect to deploy these proceeds on an accretive basis towards a combination of unit buybacks and strategic growth initiatives. And in conjunction with this objective, we suspended the DRIP, our distribution reinvestment plan as of the end of 2025. Through last Friday, in 2026, we have repurchased $2.4 million of units at a weighted average price of $13.08 or a total of $32 million under our NCIB program. With growing cash flow generated from the business and current available liquidity of over $700 million after repaying our facility draws, we retain sufficient capital to fund our value-add and strategic initiatives, including funding our development pipeline, solar programs and contributing to our private capital partnerships.

Our 2025 performance highlights the resilience of our business. The multiple growth drivers we have built position us well to continue delivering on our operational and financial targets. For the full year 2026, we expect to maintain stable average in-place occupancy in the high 94% to low 96% range. We expect comparative properties NOI growth for the first half to be relatively consistent with the Q4 2025 growth rate. And depending on timing of leasing, we expect 2026 full year CPNOI growth to be stronger than the full year 2025.

We expect to deploy the proceeds from the sale of the initial DCI portfolio over the course of the next few quarters, more weighted towards Q2 and Q3. As such, average leverage is forecasted to be in the low to mid 7x debt-to-EBITDA range to almost 1 turn lower than at year-end on a run rate basis as we deploy the proceeds. As a result, we currently expect our Q1 FFO per unit to be slightly lower than that of Q4 2025 with the quarterly run rate accelerating as we deploy the sale proceeds.

For the full year, our current outlook for FFO per unit is $1.08 to $1.10. As we execute on our leasing and capital deployment targets, we will update our outlook. In addition to the above factors, our FFO growth expectation is predicated on current foreign exchange rates and interest rate expectations.

I will turn it back to Alex to wrap up.

Thank you, Lenis. Over the past 5 years, our cost of debt has gradually increased by approximately 200 basis points. During this time, we delivered FFO per unit growth of 30%, equating to an annual growth rate of approximately 6% to 7%. Going forward, our business remains on a strong growth trajectory, and we expect to continue delivering solid results to our unitholders.

We will now open it up for questions.

[Operator Instructions] Your first question comes from Kyle Stanley with Desjardin.

Gord, you gave a really good overview of kind of the market dynamics and leasing demand looks quite strong in the fourth quarter. I'm wondering, as we've kind of begun the first quarter of this year, have you seen any changes year-to-date that would either be more positive or somewhat concerning? And maybe where is your pipeline today versus where it would have been last quarter? I believe last quarter, with reporting, you disclosed roughly $1.7 million of leases under negotiation on both the on-balance sheet and JV portfolio. So just curious how that looks today. .

It looks good. It looks very consistent. I appreciate the question. It looks very consistent to what we saw last quarter. And the fundamentals are largely in line going into Q1. So we feel pretty good about the start of the year. .

Okay. Just looking at the Calgary assets, the development assets that have been leased up, I think the disclosure highlights $10 million of NOI on a run rate basis. I'm wondering if you can disclose how much of that $10 million of NOI was baked into the fourth quarter results. And I'm just trying to think about bringing that -- the ramp up online through 2026. .

Very limited was -- in the fourth quarter, there's been some space income producing. It is going to gradually build up into 2026 and you'll see the run rate in the second half kicking in.

Okay. Okay. Perfect. And then maybe just higher-level question as it relates to the new defense strategy. Obviously, we just kind of rolled out yesterday and still very early days. But clearly, it seems like it should be positive for manufacturing activity. And although Dream Industrial doesn't necessarily play in the manufacturing space as much. I just want to get your high-level thoughts on what this could do for demand going forward. .

Yes. Thanks for this question, Kyle. As you say, we're not in manufacturing space. However, because of the assets that we have, which is infill mid-bay product, primarily in Canada. These assets are pretty flexible. So they can be used for last mile distribution. They can also be used for light industrial. And we do have some occupiers who are in light industrial and manufacturing operations within our properties. And so these manufacturing facilities will benefit from these defense-driven demand drivers.

But broadly, industrial sector, we expect will benefit from that, primarily the more closer in mid-bay product is going to benefit mostly as opposed to kind of big box logistics and fulfillment type centers. So we are encouraged by what we're seeing, and we're starting to see early drivers from that emerging. In addition, I would say that we are seeing a slight uptick in user acquisition activity connected to defense needs in particular.

The next question comes from Himanshu Gupta with Scotiabank. .

So just on the 2026 FFO guidance, does that include full deployment of net proceeds from the JV the end of the year and NCIB as well. And the question is just wondering when we will see the accretion from that CPP JV in numbers.

Thanks, Himanshu. We do expect to deploy the proceeds over the course of the year. The first tranche closed in February, second tranche is targeted to close by the second half of the year. So that would help just with timing of deployment. So we do expect to have it -- we're targeting how it's only deployed by the end of the year. So the -- looking at Q4, kind of that run rate will be higher than what Q1 would be as the proceeds are fully deployed. So a stronger run rate through the end of the year and into 2027.

And I think in terms of types of deployment and buyback activity, I think it is going to be dependent on the opportunities. We've stated a target on the buyback program, but I think we want to just monitor other deployment activities, returns and where the unit prices and how the unit prices are acting.

Okay. Do you still expect like low to mid-single-digit FFO accretion from this transaction? It looks like more in next year than this year?

Thanks for this follow-up, Himanshu. As we communicated in the original announcement press release, we do expect that the accretion is going to fully materialize when we get the balance sheet fully deployed, which as Lenis just commented, will happen in 2026. So the accretion will build up through the second half towards the run rate. We still expect accretion to be there. And it is moderately accretive for the full year 2026 as we communicated in December when we announced the transaction. So the thesis remains intact.

Okay. And then when you say balance sheet fully deployed in terms of acquisition activity, fair to say most of the acquisitions will be done in Europe and then the remaining on the JV in Canada?

We expect that on balance sheet acquisitions in Canada will be around 30% to 40% of the volume for this year. And obviously, our co-investments in private partnerships are going to be mostly in Canada as well.

Okay. And my last question is Alex, in your prepared remarks, you mentioned market rent growth to resume in second half of this year and then next year as well. Can you elaborate like which markets you think can lead the market rent growth recovery here? And do you assume like limited new supply in the near-term?

We're already seeing market rent growth in the West. So we expect that, that will continue. Certain segments of the market in Calgary and Edmonton will likely outperform others. But broadly, we expect the market rent growth to continue in the West. And when it comes to Toronto and Montreal, we would indeed expect second half to start seeing rental growth again primarily in the tighter end of the market, which is small and mid-bay product, leading the way and then that gradually translating into growth in market rent for larger bay assets starting perhaps in Toronto, where we are seeing more robust pace of absorption.

The next question comes from Brad Sturges of Raymond James. .

Just to clarify comments there, Lenis, on the same-property NOI. I think you said for the first half of the year, you expect NOI growth to be similar to what Q4 to was. Is that correct? Would there be any guidance for the full year? Or maybe I missed that in the opening comments. .

Thanks, Brad. That's right. For the first half of the year, we were expecting the same property growth to be consistent with fourth quarter. We reported 8.4% in the fourth quarter. So to be in and around that range. Obviously, as we complete more of the leasing towards the year, we commented that we expect full year growth to be stronger than full year 2025 growth.

Just to build on that, Brad, I think what we're effectively saying is we are confident that it's going to be stronger than 2025 in 2026. The degree to which it's going to be stronger is going to depend on the timing of leasing. But we think the 2025 is an achievable hurdle.

I guess for now, we should think about it as sort of similar growth for now and then we'll kind of see on timing as the year progresses?

And we'll update you on timing again. .

Yes. Okay. You talked about private partnerships. Obviously, you've had success in Canada. Just any updates on European opportunities at this point? Is this -- is there any kind of changes in opportunity there that you might be able to get across the line this year?

No change in the outlook and we're still exploring opportunities in Europe. We did put more emphasis on to the Canadian JV with CPP Investment in the second half of 2025. So that took precedent over any European joint venture formation, perhaps pushing back the European joint venture by a couple of quarters, but it still is on our radar to explore, and we are advancing dialogue there.

Okay. And just on -- last question just on your development opportunity, I guess, more specifically like expansion and intensification. How does that opportunity shape up for this year? Could you see some more projects get out into the pipeline this year? .

Thanks for that follow-up. Yes, we do, and we are tracking a number of opportunities. Some of them on a build-to-suit basis, some of them on a speculated basis, both in Canada and in Europe. And in Canada, that would include the wholly owned portfolio, but also our private ventures. So we are continuing to pursue opportunities to activate our land bank selective thing.

The next question comes from Mike Markidis with BMO.

Just wanted to lean into the JVs in Canada a little bit, Alex. I mean I think there are -- you've outlined it a little bit in the MD&A and in your comments, but there are differences between the JVs. But maybe you could walk us through sort of the different strategies within DSI, DCI and what's on your balance sheet. .

Thank you for this follow-up, Mike. As we articulated in the announcement press release in December when the DCI venture was formed, the on-balance sheet strategy in Canada is going to lean into newer quality, you can describe it as generally core plus mid-bay infill assets, whether we've acquired them or build them that's generally what we are going to be pursuing more of for the on balance sheet strategy. The DSI joint venture is very mature. We continue to be active in looking at opportunities, both acquisitions and dispositions.

And with the in DCI joint ventures, it's just starting. It has generally more of a value-add lens to evaluating opportunities, both from a profile of assets but also from a kind of target underwriting time lines and perhaps the leverage point as well. So quite different from the DSI joint venture given its scale and overall setup.

So that's how these ventures fit together and from our standpoint, without maybe going into 2 granular specifics, we believe they fit well together and we can be active across of interest and we'll have more capital available to cover opportunities that we weren't covering before.

Okay. And then just your comment on DSI being very mature and obviously still looking at acquisitions in dispute. But from a net square footage or net asset value perspective, do you expect that to grow? Or will be the focus be more on growing DCI just because it's earlier stage at this point? .

It is hard to comment specifically. We do have acquisitions identified for the DSI joint venture. We have assets that we just closed on in Q1, and we have another asset in due diligence right now. And equally, we will look at recycling opportunities as we have in the past. It's really difficult to comment on the net growth or net contraction we will pursue both, and we'll aim to achieve the best total return outcome for the venture through this capital recycling activity.

Okay. And globally, I guess, Canada is a pretty small place. and you now got 3 different strategies running in Canada. Is there room for any more at this juncture? Or do you think you're pretty much set up from a private capital perspective on the Canadian assets for the Canadian landscape? .

We feel like we reasonably set up, we don't have a core segment of the market of it right now. So there could be room for that, but we're not actively pursuing that at the moment.

Okay. I guess last one or maybe 2 last ones for me quickly. Just, is there -- I mean, obviously, things can change and an asset could become more of a core value add versus what you deem as being core plus today. But is there any more seeding or transfer of assets from the wholly owned into either of the JV is contemplated in the near term?

Nothing is currently contemplated.

Okay. Last one for me. I know you guys have a core fund in the U.S. just it's been relatively inactive if you can give us some updated thoughts on the landscape down there and if there be potential to raise capital for a U.S. strategy over the next year or two?

We are seeing better opportunities in the U.S. now than we were, let's say, 2 years ago. So that is both on the acquisition side and on the capital raising side. So we are spending more time there. And hopefully, we'll see more growth for that vehicle or -- if not, then we'll perhaps start exploring other opportunities more likely in private capital partnership set up to grow the U.S. business. We are generally encouraged by the trends we're seeing for the U.S. market for that vehicle, although it is early days.

The question comes from Sam Damiani with TD Cowen.

Alex, just on your comment for market rent growth sort of to resume in the latter half of this year into next year. What do you need to see from a market sort of data point perspective to, I guess, give you more confidence or would be more certain that market rent growth is going to resume under that time line. .

Thanks for this follow-up, Sam. We expect to -- that we will need to see consistent pace of absorption, consistent trends either stable to downward on the availability rates and that will then lead to greater confidence by the landlord community to for stronger rents. And there are some less significant metrics and factors such as sublease availability that will contribute to that. We think that it's not going to be a broad-based rental growth to start. It's going to affect certain subsegments of the market first.

Where we're seeing, for example, if you look into statistics for the GTA is that there's quite significant difference between vacancy rate for small assets versus large assets as a proxy for a small bay versus large bay. And so with these smaller assets showing tighter vacancy rates and availability rates. So we will likely see or we expect to see stronger rental growth for that segment of the market sooner than the larger bay. And it is going to be market-specific not just segment specific, as we commented before, we expect to see stronger perhaps rental growth in the West and maybe sooner than we would in the GTA and the GMA.

Okay. That's helpful. And do you -- between the DSI, the DCI, I appreciate the new acronyms there and the balance sheet strategy, I mean, which of those sort of 3 buckets would be -- you expect to see the most acquisition activity in 2026?

Well, for the own balance sheet program, we expect to deploy the capital that we have, whether it's in the unit buybacks or the acquisition. So we expect that is going to be all deployed in 2026. When it comes to private ventures. It is difficult to comment. These are early days for the DCI JV. We don't want to comment on behalf of our partners indirectly. So we'll report on our progress, including the pipeline that we are pursuing for debenture as we make progress.

Appreciate that. Last one for me, and I apologize if this might have been asked, but we're working on a European JV, is that still in the works? Has it -- have you progressed on that sort of path since November, December? .

So we commented earlier, Sam, you may have missed that, yes, it's still something that we are pursuing. We did put more emphasis on the DCI JV in the second half of 2025. We didn't want to pursue kind of 2 joint ventures at the same time. So it did push out the European JV formation by maybe a couple of quarters, but it still is something that we are exploring.

The next question comes from Matt Kornack with National Bank. .

It was evident with the results that you sold some vacancy but also some mark-to-market potential. Obviously, the cap rate was quite low on what you achieved. But can you give us a sense of the: a, whether the residual portfolio that you wholly owned should operate at a higher occupancy; and b, just the ability to get kind of cap rates more in line with your IFRS cap rate in terms of deploying some of that capital?

Yes. Thanks, Matt. So the margin opportunity in the DCI initial portfolio was quantified in the announcement press release and if you refer to that, you'll see that the mark-to-market opportunity as of September 30 in the DCI initial portfolio and on balance sheet holding on portfolio was pretty close. Two, as we approach year-end, the mark-to-market opportunity for the wholly owned portfolio did decline a little bit just as a function of NOI growth and in-place rental growth as opposed to kind of changing the balance dramatically.

When it comes to the occupancy outlook, as Lenis commented, we think that mid-90% range for our portfolio, call it high-94% range to low-96% range is the right run rate. For 2026, we obviously are aiming higher but as we've consistently highlighted for multi-tenant portfolio like ours, high 96% to 97% range is relatively full. We're unlikely to exceed that for a prolonged period of time.

Makes sense. And then as we think about -- and again, we've all asked about this market rent growth inflection, but is there kind of a magic number on occupancy before tenants start to get a little nancy and want to pay up the rent or make decisions to move into space that would maybe precipitate that change in market rent? .

Our observation is that every market is different in that regard. So there are markets where rents grow at 6% to 7% vacancy and there are markets where rents are growing at 3% vacancy. So it is highly market-specific and increasingly a subsector specific. So what we generally expect we need to see is just consistent pace of absorption and consistent development of availability rates, flat to down.

Okay. And then just looking at your projects in planning, I think, to get to the 6% to 7% estimated unlevered yield. It looks like you need kind of in the $18 rent level. Obviously, different markets. So maybe it's achievable in some and not others. But can you give us a sense, is that still kind of the gravitational pull higher in terms of market rents is that it's more expensive to deliver this type of space than what you're currently getting for space in the market. .

Yes. A lot of our products planning are in Brampton or they weighted towards Brampton by cost to complete. And rents for new products in Brampton are in that high-teens range, and that is pulling the average a little bit.

[Operator Instructions] Your next question comes from Pammi Bir with RBC Capital Markets.

Not sure if you can quantify this, but with the 2026 same-property NOI guidance, does the sale of the assets to the DCI JV, help or detract from that outlook that you provided, I think you're greater than 2025?

Without commenting specifically on the DCI JV, it is probably adding the numbers a little bit in the first half and relatively neutral in the second half. Maybe DCI JV, you could see high growth into 2027 as some of the vacancies get leased up.

Okay. Got it. And then just on the when is the -- again, coming back to the guidance on same property NOI. Just putting all the comments together and the occupancy numbers that you quoted, is it fair to say that at this point, the way you see it is the bulk of the growth in 2026 is going to be from higher rents as opposed to occupancy gains.

Yes, there will be some slight from occupancy gains. But I mean, obviously, it's going to be higher rents. There's the base escalators in Canada indexation in Europe. But I mean certainly, the trend over the last few years has been on capturing the higher rents as we've rolled over leases, and that will continue. I think we included some disclosures as to kind of over the next few years, the spreads of where our in-place rents are by market versus the average market rents for the region. So there's still quite a bit of upside to capture.

Okay. Got it. And then just maybe last one, sticking with the lease maturities and tenants. Any on your watch list at the moment? And any large known vacancies coming back to you in the next few quarters or that you're aware for this year?

We have a couple of vacancies coming back to us. There's one unit in Spain that is coming back to us in the first quarter that we expect to re-tenant at higher rents after demising that unit, that's 200,000 square feet there's a couple of idiosyncratic units that are on known vacates, but then there's vacant units currently vacant units in the pipeline. So overall, as Lenis said, occupancy and run rate plus/minus at the range where we are at today for 2026 on average is a good modeling level. .

Okay. Great.

Just kind of following up on your CPNOI question, Pammi. As you know, over the last year or two, while occupancy wasn't contributing to the NOI growth, it was actually taking away a little bit as occupancy was declining slightly. And so as we expect that the occupancy is going to stabilize in-place occupancy is going to stabilize at today's level, then it's going to be less of a negative factor to the overall CPNOI equation. .

The next question comes from Tal Woolley with CIBC.

Lenis, in the outlook for this year. I think just looking at your numbers, you did about $11 million in management fees in 2025. I'm just wondering on the timing of the JV closings and the expected ramp-up of its asset base. If we're looking at incremental management fee in the order of like $3 million to $4 million for 2026 and then growing thereafter. .

Yes, I think that would be -- it seems like a reasonable estimate. Obviously, the new venture is going to close in 2 tranches, so it'll take a little bit of time for that new component to kick in throughout the year, but certainly, by the second half of the year, that will be in there. A lot of the margin is also dependent on leasing, there's a recent component as well, but there's a little higher margin on that as well. So that's a little bit lumpier, but obviously something that we focus on as well.

Okay. And just if I'm modeling this, which is an exit cap rate and around 6%. I'm not going to get too much in trouble if I use that.

Tell forward purpose you modeling as cap rate?

Sorry for the portfolio disposition. For the $805 million.

We would suggest you refer to the announcement press release where we quantified the in-place rents. And the disclosure we provided in the announcement press release will also allow you to calculate roughly the market rents the portfolio and then that would be a more accurate way of modeling the NOI impact.

Okay. And then I just -- I apologize if I missed this earlier, but just with respect to the potential defense opportunity there is in the industrial space here in Canada, is this something like you're not especially interested in, just given that you guys are -- tend to focus more here in the country on small and mid-bay product versus larger stuff. What sort of strategy are you trying to develop to address the potential demand there? .

Thanks, Tal. We are very interested in it. And we actually think that our product is going to be a beneficiary of the additional defense requirements and activity relating to defense industries because of the flexible nature of our real estate. So occupiers for this kind of product tend to look for closer infill assets with strong power connectivity to public transit, and that's exactly the type of assets that we are targeting to own and own already. And so we are very much focusing on the defense opportunity. and how it can affect our portfolio.

Do you have an estimate of how much square foot do you have occupied by defense-related tenants right now, whether it's contractors, the government itself? .

We are -- we do -- we haven't disclosed that yet, but we'll probably provide more color over time. It is meaningful across our managed portfolio. We have a number of that are already in defense sector. And we have some light industrial and manufacturing. We have buildings with strong power connections, connectivity and that drives, again, demand from light industrial-type occupiers. So this is something that we are going to quantify more as we observe kind of how the defense requirements develop.

Okay. And then I think in mid-December, you were sort of talking about how you were in due diligence and late-stage negotiations on roughly $600 million of product. I'm just wondering if you can talk about the progress made there and where and what type of -- where are you finding these assets right now? And so any quantification of like what the sellers -- like who's selling this stuff right now? .

Yes. So we commented in our prepared remarks that we have over $350 million of assets in exclusive negotiations. Going in cap rate, we are currently underwriting these assets too, it is just under 6% with mark-to-market cap rate in the mid-7% range. And these are mid-day assets in our target markets. So this is the type of product that you will be very familiar with as you look at what we've been acquiring over the last few years.

And no large portfolios out there at all?

We are monitoring a number of portfolio situations across our footprint.

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

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

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

Welcome to the Dream Industrial REIT Third Quarter Conference Call for Wednesday, November 5, 2025. [Operator Instructions] The conference is being recorded. [Operator Instructions]

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 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 on Dream Industrial REIT's website at www.dreamindustrialreit.ca.

Your host for today will be Mr. Alexander Sannikov, CEO of Dream Industrial REIT. Mr. Sannikov, you may now go ahead.

Thank you. Good morning, everyone. Thank you for joining us today for Dream Industrial REIT's Third Quarter 2025 Conference Call. Here with me today is Lenis Quan, our Chief Financial Officer.

In the third quarter, we reported healthy operating and financial results supported by strong leasing spreads and robust growth in CP NOI. For the quarter, we delivered 4.3% year-over-year FFO per unit growth and 6.4% comparative properties NOI growth, driven by a 7.6% increase in in-place rents. We leased out over 250,000 square feet of vacancies and newly completed developments, which lifted our in-place occupancy 40 basis points to 94.5%.

Our balance sheet remains strong with conservative leverage and ample liquidity. We are advancing our capital recycling strategy across our platform. During the quarter, we completed the sale of 2 nonstrategic assets within the Dream Summit venture, and we are firm on a disposition within the REIT's portfolio. In addition, we are currently underway on approximately $150 million of potential dispositions to user and investor buyers.

These dispositions reflect our broader program to enhance portfolio quality and total return profile as we redeploy this capital into accretive opportunities, including higher-quality acquisitions that align with our longer-term portfolio strategy. So far this year, we have acquired over $100 million of infill mid-bay industrial product with a targeted stabilized yield of over 7%. These acquisitions are representative of our broader pipeline and of the asset profile we will continue to pursue.

Recently, we completed the acquisition of a 130,000 square foot asset in Germany. The asset was acquired on a short-term sale and leaseback arrangement at market rents, delivering a going-in cap rate of over 8%. The asset is well located, features functional design and has existing rooftop solar panels to support our ancillary revenue program. The asset has undeveloped excess land, which can be activated for outside storage or expansion opportunities.

In the quarter, we also completed the acquisition of a 90,000 square foot urban logistics asset in the Netherlands. The asset is within a prime logistics node with scarce supply. We acquired the property vacant and leased out the building within the first month of ownership for a 5-year term commencing in November at rents exceeding our underwriting. We achieved a yield on purchase price of over 8%. This leasing success is reflective of the healthy leasing momentum we are seeing across the mid-bay portfolio in Europe. With over 2.5 million square feet of leases signed to date in our European portfolio, we continue to see healthy demand for our assets and continued rental growth in core urban locations.

In Canada, the occupier markets remain active and we see sustained demand in particular for well-located mid-bay infill assets. The leasing spread remained healthy. In our wholly owned portfolio in Canada, we achieved around 40% spreads in Q3 when adjusted for one fixed rate renewal this quarter. This is in line with the spreads we achieved in Q3 2024.

We continue to work closely with our tenants as they implement their supply chain adjustments in response to the evolving trade dynamics. Notably, we are encouraged by the level of activity from tenants in the automotive sector. So far this year across our wholly owned and managed portfolios in Canada and in Europe, we signed over 1.8 million square feet of new leases, renewals and expansions, including on a build-to-suit basis with automotive occupiers led by blue-chip multinational names, and that is at an average spread of over 40% with mid-3% contractual escalators.

While the RFP activity has been gradually ramping up from early Q2 2025 and our leasing pipeline remains robust, we are seeing longer decision-making time lines, impacting the pace of absorption. And while our in-place occupancy increased this quarter in line with our expectations, longer lease negotiations led to a slight decline in our committed occupancy to 95.4% this quarter. Since the quarter end, however, we have signed or advanced new lease negotiations on over 1.7 million square feet on existing vacancies across the wholly owned and managed portfolios, leading to additional commitments.

Turning over to our strategic pillars. Partner capital formation remains a key focus for us as we are looking to grow our private partnerships revenue significantly over the next 3 to 4 years. The capital formation environment is improving as investors are shifting their focus from private credit to private -- to equity investments. We maintain an active dialogue with potential partners across our operating footprint, including in North America and Europe, and are encouraged by the progress we're making.

Our solar program is progressing well with 2 completed projects and 5 new projects underway in the quarter. Over the past year, our near-term pipeline has grown significantly, now representing more than 120 megawatts of additional solar generation potential in feasibility or advanced stages.

We're making progress on our strategy to upgrade power capacity at select properties across the portfolio for data center uses. We completed preliminary due diligence for 13 sites across Canada that could accommodate a critical load of over 600 megawatts. On 2 of these sites, we advanced deposits to local utilities to secure 105 megawatts of power with phased delivery over the next 2 to 5 years. Concurrently, we're in active discussions with operators and end users to explore potential value creation opportunities with the generated power capacity.

Overall, we are encouraged by the progress across our key initiatives, including leasing, capital recycling, new revenue sources, positioning DIR well for the year ahead.

I will now turn it over to Lenis to discuss our financial highlights.

Thank you, Alex. Our business continues to deliver stable and consistent growth. We reported diluted FFO per unit of $0.27 for the third quarter, 4.3% higher than the prior year quarter. The solid year-over-year growth was primarily driven by comparative properties NOI growth of 6.4% for the quarter, led by 8.5% growth in Canada. In addition, lease-up of existing vacancies and newly completed developments contributed to overall FFO growth.

Our net asset value at quarter end was $16.74 per unit, reflecting stable investment property values. We continue to actively pursue financing initiatives to optimize our cost of debt and maintain a strong and flexible balance sheet with ample liquidity. We ended Q3 with leverage in our targeted range and net debt-to-EBITDA ratio of 8.1x. To date, we have effectively addressed approximately 70% of our 2025 debt maturities.

In July, we closed on the issuance of our $200 million Series G unsecured debentures at an all-in rate of 4.29%. We will swap the proceeds to euros at an effective rate of 3.73% starting December 22, 2025. The proceeds were partly used to repay the outstanding balance on our credit facility with the remainder earmarked towards prefunding our remaining $450 million maturity in December and for general trust purposes.

We continue to evaluate several refinancing options to address the remaining debt maturity balance, and are currently observing rates in the high 3% range in the Canadian unsecured market with euro-equivalent debt approximately 20 basis points lower. These rates are about 30 basis points lower than what we were seeing this time last year.

We completed the quarter with over $828 million in total available liquidity. Combined with the growing cash flow generated by our business, we are well positioned to fund our value-add and strategic initiatives, including our development pipeline, solar program and contributing to our private capital partnerships.

Our third quarter performance demonstrates the resilience of our business, and we remain confident in our growth trajectory for the balance of the year and into 2026. Despite a slower pace of leasing in the first half of 2025 as a result of trade tensions, we have delivered healthy organic growth, supported by increasing in-place rents across our portfolio.

Our FFO per unit continued to grow at a strong rate, even though we refinanced over 70% of our 2025 debt maturities early. CP NOI has outpaced the higher interest expense. As our in-place occupancy stabilizes, we anticipate the business to produce even stronger NOI growth driven by contributions from stable to higher occupancy and continued growth of in-place rents.

For the remainder of the year, we expect the in-place occupancy to remain stable. With that, our expectation is that the pace of CP NOI growth in the fourth quarter will be consistent with Q3. We also expect that our Q3 FFO per unit run rate to continue into the fourth quarter. As such, adjusting for early refinancing of our 2025 debt maturities, we expect the full year results to be aligned with our previously communicated outlook.

Looking ahead, we continue to expect a strong pace of FFO per unit growth into 2026. Our FFO growth expectations for 2025 and 2026 continues to be predicated on current foreign exchange rates, leverage levels and interest rate expectations as well as expected timing of the lease-up of our transitory vacancies.

I will turn it back to Alex to wrap up.

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

We will now open it up for questions.

[Operator Instructions] Your first question comes from the line of Sam Damiani of TD Cowen.

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

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

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

Okay. And so that's clear. And just on FFO growth, you're reiterating your target. But again, your commentary, I think, last quarter was similar or higher growth in '26. Is there any change to that outlook?

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

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

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

Your next question comes from the line of Brad Sturge of Raymond James.

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

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

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

On the FFO growth and payout ratio, yes, your observation is very much aligned with ours, but also is aligned with the overall strategy we communicated at the Investor Day in terms of how we think about the distribution policy. So we want to see our payout ratio continue trending down. And over time, we see ourselves implementing a distribution policy that would translate into sustained growth in distributions per unit and that growth will be somewhat lower than the pace of growth in free cash flow so that the payout ratio continues to decline and the free cash flow continues to compound for the business.

So there's no change to that broad philosophy, if you will. The only thing that we haven't yet communicated, and it's an ongoing conversation, is the timing of when we're going to implement this policy, if you will. So we'll obviously communicate this to the market, but the business is well positioned as you observed with the Q3 results as well.

When it comes to capital allocation, nothing has changed really in terms of how we think about it relative to the prior quarter. We continue to see good opportunities that are proprietary to the business, and that includes investing in our private partnerships, including -- includes our intensification opportunities, whether it's excess land or solar. Some of the acquisitions that we are pursuing and highlighting in the Q3 results are at pretty compelling returns, as you can see. And obviously, we're looking at the unit price and availability of capital as to whether continued NCIB activity would make sense. So all of these opportunities are on the list and we continue evaluating them as we get capital.

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

We will communicate this as soon as we're ready. It's an ongoing dialogue that we're having with -- obviously with the Board and with the [indiscernible] management team.

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

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

We generally don't expect to see material changes to our retention ratio in 2026. Himanshu, as you know, over the last decade, we've averaged at around 70%, 75% pretty consistently. We expect that retention ratio to carry into 2026 without any material deviations. So yes, there will be some space coming back to us, but that's normal course for our portfolio.

And as far as rental spreads, as you know, we disclosed the expiring rents in the MD&A and we also disclosed the market rents. So we expect market rents to be consistent with the overall market rents for their respective regions for 2026 expiries. So there's no idiosyncratic space that is coming back to us or that is maturing in 2026.

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

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

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

It's getting completed. It's not fully complete. So it still is underway. There's still some work happening at the site. The leasing progress has been encouraging. We see good volume of RFPs for that asset, including for smaller footprint. The asset demises into small units as little as 50,000 square feet all the way up to the full building. And this development is 2 buildings of about 200,000 square feet each. So we see RFP activity for the entire range, and generally are encouraged by the feedback and how the asset is positioned in the market.

Okay. Good to hear that.

[Indiscernible] right now.

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

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

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

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

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

Alex, good to see, I guess, the progress on the data center initiative. I think you said 2 deposits put down. I was hoping you can help us understand, I guess, stage delivery 2- to 5-year timeline. But how does that work? You put a deposit down. Who actually funds the infrastructure? I guess, I'm trying to get a sense of how the CapEx will build as you continue to get more and more approvals at the municipal level for power.

Yes. So, so far, the deposits that we advanced are refundable deposit. This just secures our place in the queue and allows us to engage with occupiers on definitive time lines with definitive power capacity and delivery schedule. As we advance the infrastructure work for these sites, then it will require incrementally more capital to then have more firm visibility into power time lines. And then -- well, the big capital outlay will be obviously the construction itself.

So what our priorities are right now is to secure either a JV partnership or a partnership with an operator or a lease on a powered shell basis so that we can continue investing capital with greater certainty of the revenue side of the equation.

Okay. And then if it's not -- if it's 2 to 5 years out in terms of stage delivery, does that mean that substantial capital isn't really in the pipeline for 2026 and really 2027 at this point?

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

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

A complete spec development would be unlikely at this point. So we'll want to secure some components of the revenue at least to proceed.

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

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

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

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

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

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

We are not really seeing that impacting leasing decisions in terms of how occupiers are thinking about their footprints. It rarely comes up as a discussion point. If anything, we've seen a little bit more occupiers recently asking for longer lease terms as they are looking to invest in their space and they need term security. We've seen a little bit more of that over the last 3 to 6 months.

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

Yes. So in Montreal, it's a bifurcation between larger bay and smaller bay, small- to mid-day facilities. We see ongoing demand. And leasing strength and spreads are strong for mid-bay leasing and that's reflected in our stats this quarter. So adjusted for a fixed rate renewal that we mentioned in the prepared remarks, our spreads in Montreal and Quebec were 50%, which are pretty healthy relative to last year or the prior periods.

And when it comes to larger footprints, that's where we see more supply. That's -- most of the Amazon sublet footprint is -- or all of it is larger-bay facilities. And we're seeing a bit less demand for those kinds of footprints. And that translates into maybe softness in that segment of the market. Most of our portfolio is addressing kind of small- to mid-bay requirements and is seeing good traction when it comes to new leasing and when it comes to renewals.

[Operator Instructions] Your next question comes from the line of Matt Kornack of National Bank Financial.

Just quickly on the market rent trajectory. It looks like Western Canada is improving, Toronto is kind of stable and Montreal you're seeing a little bit of pressure, albeit off some pretty lofty highs. So how should we think about -- from your earlier comment, it sounds like you're expecting those levels to kind of stick at current levels. But when should we expect or do you think there is an inflection coming in market rents over the next year or 2?

Well, Matt, broadly we maintain the outlook that market rents are driven by the overall trajectory of availability rates in any given market. And so as we see continued absorption in the GTA, in Calgary and over time in Montreal, we expect to see, obviously, overall availability rates stabilizing and start trending downwards. And that's when we expect to see the inflection point overall in terms of market rent development.

In the meantime, and I think it's important to highlight, is, even in today's environment that is arguably softer than, let's say, 3 years ago, we are signing leases routinely with 3%, 3.5% escalators for 3- to 10-year terms. And that continues to be very much part of the leasing equation for Canada.

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

Yes, dynamics are remarkable. We got indeed some space back, about 100,000 feet in Edmonton, and that was late summer, early fall. And within a month, we relet the entire 100,000 square feet to 2 occupiers, and they will be both commencing in fourth quarter. So that committed occupancy will go -- for that particular asset in Edmonton overall will go back out within a couple of months.

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

Some of it net new space. Some of it is optimizing their supply chains across North America. Some of it is net new entrants into Canada. For Tier 1 automotive, that's in our managed portfolio, we just signed a 200,000 square foot lease with a Tier 1 automotive group. We've expanded a couple of multinational OEM groups. So it's a range, but mostly driven by ongoing kind of optimization of supply chains when it comes to automotive sector.

And generally, good credits, I assume. But what sort of terms on those leases?

The terms range from 5 to 10 years, very good credits. So these are Tier 1 –- either Tier 1 groups or blue-chip multinational OEMs.

Okay. Fair. And then just lastly, a technical one. The tax on the European portfolio, it was a bit higher. It's a little over $1 million this quarter. Is that a new run rate because the euro has appreciated? Or should we expect it to kind of come back down to kind of $750,000 or so?

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

Congrats on a solid quarter, guys.

A question comes from the line of Tal Woolley of CIBC.

Just on the data center strategy, I'm just -- can we call these pilots? Or is this really like the official start of the strategy?

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

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

The 2 sites for which we advanced deposit are both existing assets. They're solid buildings. But the data center potential is far stronger from a return standpoint. We have generally redevelopment rights or very short leases on these sites, allowing us to then tangibly pursue data center strategies for these assets.

Got it. And then also can you give us an idea of like how we should think about like -- I'm not exactly familiar with like when you guys want to acquire power, like that process and how much it sort of cost to walk through that?

Yes. So when it comes to the process of acquiring power, it's very specific to each utility, specific to each location. That's why we've shortlisted 13 sites. Of the 13 sites, some are getting to power faster. But the rest of the sites are still very much on the list and we are continuing to advance the dialogue there.

Look, CapEx really ranges per asset. So what we will do as we firm up the plans for any given site, we will articulate the CapEx, the CapEx phasing and the revenue model to our investors and everyone who follows the company for them to -- for you to understand how we're thinking about it and what's involved. So it's a bit premature to comment on that, but we will definitely provide the details as we make progress.

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

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

And on the partner capital –- or partnership capital side, has there been any real impediments that you found kind of working through the process right now just in terms -- like is it market conditions or other things that maybe slowed this process down?

There's been a lot of changes for -- in terms of how many global pension funds are organized over the last 12, 24 months, lots of changes in terms of how they think about real estate relative to overall real assets portfolios. And that has impacted capital formation processes broadly. And it's kind of well documented that capital formation time lines have been longer over the last 2 to 3 years than normal. And so we're starting to see that changing. We're also starting to see groups shifting focus back to equity investments from credit investments. And so all of these things are likely going to be helpful for what we are trying to achieve.

Our next question comes from the line of Pammi Bir of RBC Capital Markets.

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

I would say it's 50% to 70% larger in terms of deals that are sitting in pipeline. So yes, it is a notable increase. When it comes to the conversion rate -- look, these are all tangible requirements, and so we expect that many of them will convert. It's just a question of time. A lot of groups are being very cautious when it comes to new footprints. They want to -- if it's 3PLs, they want to make sure that they have their contracts secured. When it comes to end users, it takes quite a bit of approvals internally to get things going. There are some leases that we signed this quarter for new developments that have been in negotiations for 6 months. So yes, they do convert, the commitments do get signed. It just takes longer to get there. Hence, the pipeline is growing.

And then just to clarify, none of that -- or is any of that 1.7 million square feet in your committed occupancy numbers?

No, not yet.

None of it, right? Okay. And then just coming back to the comment around dispositions, the $150 million. What's the sense of timing here? And if you can maybe just provide some color around the geographic mix? I think, if I recall, some of that might be Saskatchewan. But just if you can provide an update on that, that would be great.

Yes. Indeed, our Saskatchewan portfolio is in our nonstrategic bucket. So we are looking to sell some of these assets or most of these assets over time. There are some user buildings in the GTA within the pipeline as well. In terms of overall time line, we'll expect to see some firm up or even close in the first quarter of '26.

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

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

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

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

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