DIR.UN Dream Industrial Real Estate Investment Trust

This news release contains forward-looking information that is based upon assumptions and is subject to risks and uncertainties as indicated in the cautionary note contained within this news release.

Logistics Portfolio Chicago, Illinois Chicago, Illinois Columbus, Ohio Columbus, Ohio Indianapolis, Indiana Indianapolis, Indiana Cincinnati, Ohio Cincinnati, Ohio Louisville, Kentucky Louisville, Kentucky Current vs. Pro Forma

DREAM INDUSTRIAL REIT (DIR.UN-TSX) (“Dream Industrial REIT” or the “Trust”) today announced that it has waived all conditions to acquire a portfolio of 21 buildings located in five cities across the Midwest United States (“the Acquisition” or “the Acquisition Portfolio”) totalling approximately 3.5 million square feet of gross leasable area (“GLA”). The Acquisition Portfolio is well located in the attractive U.S. logistics markets of Chicago, Cincinnati, Columbus, Indianapolis, and Louisville. The total purchase price for the Acquisition is approximately CAD$235 million (US$179.1 million) and is expected to be accretive to the Trust’s funds from operations (“FFO”) per unit on a stabilized basis. The Acquisition is scheduled to close by the end of the first quarter of 2019.

Acquisition Portfolio Highlights

• Sizeable portfolio totaling 3.5 million square feet of GLA adds immediate scale in core logistics markets in the Midwest U.S.
• Each city within the portfolio is supported by large commercial airports, intermodal transport hubs and is accessible to over 50% of the U.S. population within a one-day drive.
• Strong economic fundamentals supporting industrial real estate (e-commerce and logistics) with the average vacancy across all markets at 5.4%, and unemployment rates in each market below 4%.
• The portfolio includes an attractive mix of single-tenant assets and multi-tenant facilities that service a broad range of tenant uses and sizes from small bay to large distribution facilities.
• The portfolio is comprised of functional distribution facilities that are well-located, highly reusable and cater to a wide range of users. 
• Purchase price of US$179.1 million represents a going-in capitalization rate (“cap rate”) of 6.0%, US$51 per square foot (below estimated replacement cost of US$71 per square foot), with 3.0% average annual rent escalators built into the leases.
• Near-term growth opportunity with a recent vacancy of approximately 300,000 square feet in a high-quality, well-located facility in Louisville. Following lease-up, we expect the cap rate to increase to approximately 6.5%.

“Consistent with our communicated strategy, the Acquisition adds highly functional assets in key industrial markets that offer attractive yields with strong growth potential, while improving the overall quality of the Trust’s portfolio,” said Brian Pauls, Chief Executive Officer of Dream Industrial REIT. “With a total GLA of 3.5 million square feet, the Acquisition Portfolio enables us to establish a meaningful footprint in attractive logistics markets in the U.S. and also add scale in our existing markets. Moreover, the Acquisition further highlights the Trust’s ability to work alongside the PAULS U.S. platform and successfully source attractive investment opportunities in our core markets at below replacement cost.  Less than two years after announcing our U.S. expansion, we have successfully acquired 7 million square feet of GLA and the U.S. now represents our initial target of approximately 20% of our gross asset value. Looking forward, we will continue to add portfolio scale with a primary focus on our target Canadian markets, including Ontario and Quebec.”

Acquired Properties and Market Overview1

The Acquisition Portfolio is comprised of 21 high quality and functional industrial properties (totalling approximately 3.5 million square feet of GLA) that further expands the Trust’s presence in the United States. The portfolio includes both single and multi-tenant buildings that are well located in strong U.S. logistics hubs. The properties are strategically situated in each of their respective markets, located in close proximity to major U.S. cities with excellent access to interstate highways and transportation nodes. The tenant base has invested significant capital in their respective properties and consists of an attractive mix of large and medium sized enterprises that span across multiple industries. The portfolio is currently 91% occupied, and excluding approximately 300,000 square feet recently vacated in the Louisville property, portfolio occupancy is 99.6% with a weighted average lease term of 4.1 years. With Louisville just having recorded its second strongest quarter in market history, with 2 million square feet of net absorption, the recent vacancy at this property provides an opportunity to enhance the Trust’s yield through aggressive lease up.

1Certain statistical information in this section has been taken from the following sources: United States Bureau of Labor Statistics – September 2018 report; CBRE Chicago Industrial Snapshot Q3-2018; CBRE Columbus Industrial Snapshot Q3-2018; CBRE Indianapolis Industrial Snapshot Q3-2018; CBRE Louisville Industrial Snapshot Q3-2018; and CBRE Cincinnati Industrial Snapshot Q3-2018.

Chicago, Illinois

The Chicago industrial market experienced its 33rd consecutive quarter of positive net absorption in Q3-2018 and market vacancy is now at 3.5%. Demand for mid-to-large bay space is strong with over 80 tenants looking for at least 50,000 square feet of space, for a cumulative total of 21.1 million square feet. The development pipeline represents less than 1% of market inventory despite 12.5 million square feet of new supply under construction. The Acquisition Portfolio consists of four assets totalling 1.3 million square feet, located primarily in the O’Hare and Lake County sub-markets. The vacancy rate across the respective sub-markets averages 2.3%.

Columbus, Ohio

Located within 500 miles of approximately 50% of the combined population in the U.S. and Canada, Columbus serves as a major logistics hub with more than 4,400 warehouse/distribution facilities and employing 83,000 people. The Acquisition Portfolio includes 12 buildings totalling 1.2 million square feet in Columbus. The majority, or 11 assets, are located in the West submarket, with a low vacancy rate of 1.7%. The remaining building is strategically located in the Northeast submarket close to major population centres. This is the tightest submarket in the city, with a vacancy rate of only 0.8%. These assets complement the Trust’s two existing assets in Columbus, adding scale and bringing the Trust’s total Columbus portfolio to 2 million square feet.

Indianapolis, Indiana

With seven Fortune 1000 companies headquartered in Indianapolis, the city has the eighth lowest unemployment rate amongst the 40 largest metro areas in the U.S. Indianapolis experienced 3.3 million square feet of positive net absorption during Q3-2018, the 32nd consecutive quarter with positive net absorption. Vacancy is currently at 4.5%, a post-recession low. The Acquisition Portfolio includes two large-bay single tenant buildings that are located in Indianapolis, totaling 632,000 square feet. The assets are well-located with access to major transportation corridors and skilled labour.

Cincinnati, Ohio

Cincinnati has one of the tightest market-wide vacancy rates in the U.S., which includes absorption of a significant amount of recent industrial construction deliveries. Net absorption in Q3-2018 totalled 1.1 million square feet with vacancy at 3.2% as of Q3-2018. The Acquisition Portfolio consists of two multi-tenant buildings totalling 140,000 square feet located adjacent to the Cincinnati Airport and in the preferred Northern Kentucky submarket which has excellent highway access and is located minutes away from Amazon Prime and DHL Supercargo Hubs.

Louisville, Kentucky

Industrial fundamentals in Louisville are strong with Q3-2018 marking the second highest quarterly net absorption (2 million square feet) in the history of the market, just behind Q2-2018 of 2.6 million square feet. Vacancy in the market is 6.0%, down 200 bps year-over-year. The Acquisition Portfolio includes one 303,000 square foot property in Louisville which has immediate highway access and visibility along I-65. This 28 foot clear high-quality distribution and warehousing facility is the newest property in the portfolio.

Pro Forma Portfolio

Upon completion of the Acquisition, the Trust‘s portfolio will comprise 244 properties (including the previously announced acquisition of a property located in Montreal which closed in October 2018) with a total GLA of 23.7 million square feet and a pro forma gross asset value of $2.3 billion.  Approximately 7 million square feet or $0.5 billion (22%) of the pro forma portfolio will be located in the United States. The following chart illustrates the Trust’s geographic exposure based on gross asset value on a pro forma basis following the completion of the Acquisition.

Acquisition Financing

Equity Offering

The Trust has entered into an agreement to sell, on a bought deal basis, 12,000,000 units of the Trust (“Units”) at a price of $10.45 per Unit to a syndicate of underwriters led by TD Securities Inc. (the “Underwriters”) for total gross proceeds of $125 million (the “Offering”). In addition, the Trust has granted the underwriters an over-allotment option to purchase up to an additional 1,800,000 Units, exercisable in whole or in part, for a period of 30 days following closing of the Offering. If the over-allotment option is exercised in full, the gross proceeds of the Offering will total $144 million. Closing of the Offering is subject to certain customary conditions, including the approval of the Toronto Stock Exchange.  The Offering is expected to close on or about February 13, 2019.

The Trust intends to use the net proceeds from the Offering to partially fund the purchase price of the Acquisition and for general Trust purposes.  The balance of the purchase price for the Acquisition will be funded from the Trust’s working capital and drawings on the Trust’s revolving credit facility.

The Units will be offered by way of a shelf prospectus supplement, to the Trust's base shelf prospectus dated September 15, 2017, to be filed on or about February 6, 2019 with the securities commissions and other similar regulatory authorities in each of the provinces of Canada.

Amended revolving credit facility

The Trust announced today that it has also received lender approval to amend its existing revolving credit facility, increasing the borrowing capacity from $125 million to $150 million, with amounts available to be drawn in Canadian and/or U.S. dollars. The amendment is subject to customary closing conditions.

“The announced transactions allow us to acquire attractive assets that meet our investment criteria while reducing our leverage and increasing our financial flexibility,” said Lenis Quan, Chief Financial Officer of Dream Industrial REIT. “We remain focused on driving organic growth and improving the quality of our portfolio. For our 2019 renewals contracted to date, we have achieved rental spreads of 9.5% and 11.5% in Ontario and Quebec, respectively. We plan to accelerate our capital recycling program in 2019 and are well-positioned with sufficient liquidity to grow our portfolio primarily in Canada by acquiring or developing best in class industrial assets that have strong income growth potential.”

About Dream Industrial REIT

Dream Industrial REIT is an unincorporated, open-ended real estate investment trust. Dream Industrial REIT owns and operates a portfolio of 223 geographically diversified light industrial properties comprising approximately 20.2 million square feet of gross leasable area located primarily in key markets across Canada with a growing presence in the United States. Its objective is to build upon and grow its portfolio and to provide stable and sustainable cash distributions to its unitholders. For more information, please visit www.dreamindustrialreit.ca.

Non-GAAP Measures

The Trust’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). In this press release, the Trust discloses and discusses certain non-GAAP financial measures, including FFO per unit. These non-GAAP measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other income trusts. The Trust has presented such non-GAAP measures as Management believes they are relevant measures of the Trust’s underlying operating and financial performance. Non-GAAP measures should not be considered as to alternatives net income, net rental income, cash flows generated from (utilized in) operating activities, cash and cash equivalents, total assets, non-current debt, total equity, or comparable metrics determined in accordance with IFRS as indicators of the Trust’s performance, liquidity, cash flow, and profitability. For a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS, please refer to the “Non-GAAP Measures and Other Disclosures” in Dream Industrial REIT’s MD&A for the three and nine months ended September 30, 2018.

Forward looking information

This press release may contain forward-looking information within the meaning of applicable securities legislation, including statements regarding our objectives and strategies and our expectations of cash flows from the Acquisition Portfolio, anticipated timing of closing of the Acquisition and the Offering, the Trust’s intentions for financing the Acquisition, the expected going in capitalization rate of the Acquisition Portfolio, expected GLA, gross asset value and geographic exposure of the Trust after giving effect to the completion of the Acquisition, the anticipated amendment to the Trust’s credit facility, the Trust’s asset recycling opportunities and potential acquisition or development opportunities. 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, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, general and local economic and business conditions; the financial condition of tenants; our ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest and currency rate fluctuations; and, with respect to the Acquisition referred to in this news release, the risk of failure to satisfy or waive any customary conditions to the closing of the acquisition or to realize the expected benefits from the Acquisitions, as well as the risk that the properties that may be acquired may not perform as anticipated. Our objectives and forward-looking statements are based on certain assumptions, including that the general economy remains stable, interest rates remain stable, conditions within the real estate market remain consistent, competition for acquisitions remains consistent with the current climate, that the capital markets continue to provide ready access to equity and/or debt and that the terms and conditions on which the Acquisition is completed will be as currently contemplated.. All forward-looking information in this press release speaks as of the date of this press release. Dream Industrial REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise except as required by law. Additional information about these assumptions and risks and uncertainties is contained in Dream Industrial REIT’s filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at Dream Industrial REIT’s website at www.dreamindustrialreit.ca.

For further information, please contact:

Dream Industrial REIT

Brian Pauls		Lenis Quan
President and Chief Executive Officer		Chief Financial Officer
(416) 365-2365		(416) 365-2353
bpauls@dream.ca		lquan@dream.ca

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