DIR.UN Dream Industrial Real Estate Investment Trust

Dream Industrial REIT (TSX: DIR.UN) (“Dream Industrial”, “DIR”, or the “Trust”) today announced that it is in exclusive and advanced discussions with regards to the acquisition of shares of a corporation that owns a portfolio of 31 institutional quality, logistics properties across Europe (the “Acquisition”). The Acquisition would significantly enhance quality and scale in key industrial markets and establish a comprehensive pan-European real estate platform, including in-house development capabilities. The total value of the real estate in connection with the Acquisition is expected to be approximately €880 million or $1.3 billion which implies a going in capitalization rate in the low 4% range, inclusive of excess land. The Trust estimates that the development potential on the excess land included in the portfolio is approximately 1.1 million square feet and could generate a yield on incremental development costs of over 7%. A majority of the properties have strong income growth potential with in-place rents estimated to be on average 10% below market. Including both the development and rent growth potential, the Trust expects the blended yield on the portfolio to be in the high 4% range. The vendors include entities controlled by certain funds managed by Clarion Partners Europe.

The purchase price for the Acquisition is anticipated to be approximately $850 million, to be paid in cash, and will be subject to customary closing adjustments. The portfolio has approximately $500 million of in-place debt which the Trust will assume by virtue of acquiring the shares of the corporation that owns the portfolio. A portion of the $850 million purchase price will be funded by the proceeds of a $250 million bought deal public offering of subscription receipts (the “Offering”) as described below. The remaining amount of the purchase price will be primarily funded through existing liquidity available to the Trust today, including over $150 million of cash on hand and $350 million of capacity on the Trust’s revolving line of credit. However, the Trust intends to issue unsecured bonds, which after swapping to euros and based on current all-in rates is expected to be approximately 70 bps on average for terms up to seven years, in order to complete the Acquisition and optimize the permanent financing of the portfolio. The Trust is also in advanced negotiations on various dispositions and joint venture strategies, primarily involving its U.S. portfolio, and anticipates it will repatriate over $250 million of equity at values in excess of IFRS carrying values. The Trust intends to maintain leverage within its previously communicated target range of mid to high 30%.

“We believe this portfolio would enhance Dream Industrial REIT’s European industrial platform by adding excellent assets in our existing markets and entering new target markets. With increased scale, we would expand our capabilities into new markets and add more development opportunities. With the larger asset base and enhanced platform, we can pursue investment and asset management opportunities that are of higher quality and can deliver higher returns,” said Brian Pauls, Chief Executive Officer of Dream Industrial REIT. “We believe the exceptional quality and location of these properties, paired with an attractive going-in cap rate, embedded strong organic growth and development pipeline provide a compelling risk-adjusted return relative to comparable income producing acquisition opportunities in North America. When paired with our debt strategy and ability to obtain leverage at approximately 70 bps on a swapped basis, this acquisition provides an exceptional opportunity for Dream Industrial REIT to deliver strong growth in FFO and net asset value per unit for our unitholders.”

The Trust anticipates that, if an agreement is entered into, the Acquisition will close in the next 60 days. There can be no assurance, however, that a definitive agreement will be reached on the terms described in this press release, or at all.

Overview of the Acquisition

Portfolio Overview

The Trust announced its expansion strategy into the European light industrial and logistics market in January 2020 and has since acquired approximately €330 million of high-quality properties in Germany and the Netherlands. The Acquisition would add approximately €880 million of institutional quality, logistics properties to the Trust’s growing presence in Europe.

By value, approximately 90% of the 31 properties being acquired are located in Germany, the Netherlands, France and Spain. Additionally, the portfolio includes one property in each of Slovakia and the Czech Republic. Several of the properties have various green building and energy efficiency certifications. The portfolio totals approximately 8.9 million square feet and includes significant excess land allowing for intensification opportunities in excess of 1.1 million square feet. The Trust estimates that this additional gross leasable area (“GLA”) could be developed over the near to medium term and achieve a yield on incremental development costs of over 7%.

The portfolio is 100% leased, has an average construction date of 2006 or later and an average clear height of 34.5 feet. This fully indexed portfolio has a weighted average lease term of 5.3 years. A majority of the properties have strong income growth potential with in-place rents estimated to be on average 10% below market. Those properties with longer term leases have stable tenants with strong covenants, including multi-national corporations and investment grade credits. Food distribution and third-party logistics tenants represent 50% of the portfolio by net rent.

The Trust believes that the assets in the portfolio are well located in their respective geographies, benefit from convenient access to transportation networks and are well-poised for growth in income and value.

Platform Overview

The Acquisition, if completed, would expand the Trust’s institutional asset management, leasing and in-house development platform. This platform expansion would enable the Trust to source and execute on acquisitions and value-add opportunities in Europe that are of higher quality and have the potential to provide higher returns relative to properties in the Trust’s current markets, as well as capitalize on the significant intensification potential embedded within the portfolio.

In-Place Financing Overview

The portfolio has approximately $500 million of in-place debt which the Trust will assume by virtue of acquiring the shares of the corporation that owns the portfolio. The weighted average cost of this debt is approximately 1.3% with an average remaining term of 2.5 years. Based on attractive financing opportunities currently available in the market, the Trust believes it has an opportunity to refinance select mortgages with longer term, unsecured debt, which after swapping to euros and based on current all-in rates is expected to be approximately 70 bps on average for terms up to 7 years.

Key Market Overview

The portfolio is located in the most sought-after markets in Europe, including Germany, the Netherlands and France. These markets are benefiting from strong occupier fundamentals, including declining vacancy rates and rental rate growth, and are experiencing strong investor demand driven by continuing growth in e-commerce penetration, growth in inventories and re-shoring of various elements of supply chains.

The table below summarizes some key metrics for the largest markets of the portfolio as of Q4 2020:

As of Q4 2020	Netherlands	France	Germany
Vacancy Rate	4.7%	5.8%	2.6%
Prime Rent	€70 / sqm€6.50 / sf	€70 / sqm€6.50 / sf	€84 / sqm€7.80 / sf
Prime Yield	3.60%	3.75%	3.40%

Source: CBRE, JLL

Pro Forma Combined Portfolio

Portfolio Metrics	As at March 31,2021, Adjusted2	Acquisition Portfolio	Pro Forma
Number of properties	284	31	315
Investment properties fair value (millions of dollars)	3,627	1,305	4,933
Gross leasable area (thousands of square feet – owned share)	29,160	8,903	38,063
Number of tenants	1,127	33	1,160
Average tenant size (thousands of square feet)	26	270	33
Occupancy rate (including committed occupancy)	97.2%	100.0%	97.9%
Average remaining lease term (years)	4.2	5.3	4.5
Average clear height (feet)	25.4	34.5	27.5
Development pipeline (millions of square feet)	~2	1.1	>3

Subscription Receipt Offering

To finance a portion of the purchase price, the Trust has entered into an agreement with a syndicate of underwriters (the “Underwriters”) led by TD Securities to sell 18,250,000 Subscription Receipts on a bought deal basis. The Subscription Receipts will be offered at a price of $13.70 per Subscription Receipt (the “Offering Price”), for aggregate gross proceeds to the Trust of $250 million. The Trust has also granted the Underwriters an over-allotment option to purchase up to an additional 2,737,500 Subscription Receipts on the same terms and conditions as the Offering, exercisable not later than 30 days after the closing of the Offering.

Each Subscription Receipt represents the right of the holder to receive, upon closing of the Acquisition, without payment of additional consideration, one unit of the Trust. Holders of Subscription Receipts will be entitled to distribution equivalent payments in respect of, and paid concurrently with, any distributions on the Trust’s units for which the record dates occur during the period commencing on the closing date of the Offering to, but excluding, the last day on which the Subscription Receipts remain outstanding. The record date for each distribution equivalent payment will be the same as the record date for the corresponding distribution declared on the units.

In the event that a termination event occurs after a distribution has been declared on the units but before the record date for such distribution, holders of Subscription Receipts will receive a pro rata distribution equivalent payment in respect of such distribution declared on the units.

The net proceeds from the sale of the Subscription Receipts will be held by a subscription receipt agent pending the fulfillment or waiver of all outstanding conditions precedent to closing of the Acquisition (other than the payment of the consideration for the Acquisition). There can be no assurance, however, that a definitive agreement with respect to the Acquisition will be reached, that the applicable closing conditions will be met or that the Acquisition will be consummated.

If the Acquisition is not completed as described above by August 30, 2021 or if the Acquisition is terminated at an earlier time, the gross proceeds of the Offering and pro rata entitlement to interest earned or deemed to be earned on the gross proceeds of the Offering, net of any applicable withholding taxes, will be paid to holders of the Subscription Receipts and the Subscription Receipts will be cancelled.

The Subscription Receipts will be offered pursuant to a prospectus supplement to the Trust’s base shelf prospectus, which will describe the terms of the Subscription Receipts. The Offering is expected to close on or about May 31, 2021 and is subject to certain conditions including, but not limited to, the approval of the Toronto Stock Exchange.

Update on Capital Repatriation

The Trust is in advanced negotiations on various dispositions and joint venture strategies, primarily involving its U.S. portfolio, and anticipates it will repatriate over $250 million of equity at values in excess of IFRS carrying values. The Trust intends to maintain an industrial platform in the United States and will continue to allocate capital to high quality properties and development opportunities in strong markets in the United States. The Trust believes that this strategy would enhance its returns on equity invested in the United States going forward.

Portfolio Overview

An overview of the portfolio is provided on the Trust’s website at www.dream.ca/investors/industrial and will also be filed on SEDAR under the Trust’s profile.

About Dream Industrial Real Estate Investment Trust

Dream Industrial REIT is an unincorporated, open-ended real estate investment trust. As at March 31, 2021, Dream Industrial REIT owns and operates a portfolio of 186 industrial assets (280 properties) comprising approximately 28.8 million square feet of gross leasable area in key markets across North America and a growing presence in strong European industrial markets. Dream Industrial REIT’s objective is to continue to grow and upgrade the quality of its portfolio and to provide attractive overall returns to its unitholders. For more information, please visit www.dreamindustrialreit.ca

Forward Looking Information 

This news release may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking information generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “would”, “could”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans”, or “continue”, or similar expressions suggesting future outcomes or events. Some of the specific forward-looking information in this news release may include, among other things, the details, status and anticipated timing of closing of the acquisitions and potential acquisitions referred to in this press release; the development and expansion potential of our properties and the acquisition properties, including development potential on the excess land included in the Acquisition; the expectation that the blended yield on the portfolio will be in the high 4% range; the growth of our portfolio; statements regarding our development and acquisition pipelines, including estimated timing for closing future acquisitions; development of additional GLA and expected yields on incremental development costs; statements regarding our access to quality and scale in key industrial markets and expected yields on incremental development costs; development of a comprehensive pan-European real estate platform, including institutional asset management, leasing and in-house development capabilities; the potential to provide higher returns relative to properties in the Trust’s current markets; the Trust’s expected acquisition capacity and leverage levels; the potential issuance of unsecured bonds and the potential swap to euros thereafter; the repatriation of equity through various dispositions and joint venture strategies; expansion of the Trust’s capabilities into new markets; our ability to refinance select mortgages with longer term, unsecured debt at favorable rates; our expectation to generate rental rate growth; the opportunity for us to deliver strong growth in FFO and net asset value per unit for our unitholders; the strength of the income growth potential of the properties included in the Acquisition and estimated in-place rents; the Trust’s growth outlook for 2021 and future years; anticipated purchase price for the Acquisition; funding of the purchase price for the Acquisition; completion of the Acquisition; the intended use of proceeds of the Offering; the entitlement of holders of Subscription Receipts to distribution equivalent payments; and the anticipated timing for the closing of the Offering. Forward looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dream Industrial REIT’s control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, global and local economic and business conditions; uncertainties surrounding the COVID-19 pandemic; fulfillment or waiver of all outstanding conditions precedent to closing of the Acquisition; completion of the Acquisition; the financial condition of tenants; our ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; interest and currency rate fluctuations; competition; and the risk that there may be unforeseen events that cause the Trust’s actual capital structure, overall cost of debt and results of operations to differ from what the Trust currently anticipates. Our objectives and forward-looking statements are based on certain assumptions with respect to each of our markets, including that the general economy remains stable, the gradual recovery and growth of the general economy continues over the remainder of 2021, interest rates remain stable, conditions within the real estate market remain consistent, competition for and availability of acquisitions remains consistent with the current climate, the capital markets continue to provide ready access to equity and/or debt, the timing and ability to sell certain properties remains in line with the Trust’s expectations, valuations to be realized on property sales will be in line with current IFRS values, occupancy levels remain stable, and the replacement of expiring tenancies will remain consistent. All forward-looking information in this news release speaks as of the date of this news release. Dream Industrial REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise except as required by law. Additional information about these assumptions and risks and uncertainties is contained in Dream Industrial REIT’s filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at Dream Industrial REIT’s website at www.dreamindustrialreit.ca.

For further information, please contact:

DREAM INDUSTRIAL REAL ESTATE INVESTMENT TRUST

Brian Pauls	Lenis Quan	Alexander Sannikov
Chief Executive Officer	Chief Financial Officer	Chief Operating Officer
(416) 365-2365	(416) 365-2353	(416) 365-4106
bpauls@dream.ca	lquan@dream.ca	asannikov@dream.ca

1All figures are presented in Canadian dollars, unless otherwise noted. If applicable, converted at the respective foreign exchange rate as at May 18, 2021.

2 Inclusive of four previously announced acquisitions that closed subsequent to March 31, 2021