Dream Industrial Real Estate Investment Trust

TSX:DIR.UN

Q3-2025 Earnings Call

[Operator]

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.

[Alexander Sannikov, executive]

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.

[Lenis Quan, executive]

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.

[Alexander Sannikov, executive]

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]

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

[Sam Damiani, analyst]

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?

[Alexander Sannikov, executive]

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.

[Lenis Quan, executive]

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.

[Sam Damiani, analyst]

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?

[Lenis Quan, executive]

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

[Sam Damiani, analyst]

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?

[Alexander Sannikov, executive]

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.

[Operator]

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

[Bradley Sturges, analyst]

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?

[Alexander Sannikov, executive]

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.

[Bradley Sturges, analyst]

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?

[Alexander Sannikov, executive]

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.

[Bradley Sturges, analyst]

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?

[Alexander Sannikov, executive]

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.

[Operator]

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

[Himanshu Gupta, analyst]

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

[Alexander Sannikov, executive]

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.

[Himanshu Gupta, analyst]

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

[Alexander Sannikov, executive]

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

[Himanshu Gupta, analyst]

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?

[Alexander Sannikov, executive]

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.

[Himanshu Gupta, analyst]

Okay. Good to hear that.

[Alexander Sannikov, executive]

[Indiscernible] right now.

[Himanshu Gupta, analyst]

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?

[Alexander Sannikov, executive]

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.

[Himanshu Gupta, analyst]

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?

[Alexander Sannikov, executive]

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.

[Operator]

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

[Michael Markidis, analyst]

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.

[Alexander Sannikov, executive]

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.

[Michael Markidis, analyst]

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?

[Alexander Sannikov, executive]

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

[Michael Markidis, analyst]

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?

[Alexander Sannikov, executive]

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.

[Michael Markidis, analyst]

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?

[Alexander Sannikov, executive]

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.

[Operator]

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

[Kyle Stanley, analyst]

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?

[Alexander Sannikov, executive]

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.

[Kyle Stanley, analyst]

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.

[Alexander Sannikov, executive]

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.

[Kyle Stanley, analyst]

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?

[Alexander Sannikov, executive]

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]

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

[Matt Kornack, analyst]

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?

[Alexander Sannikov, executive]

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.

[Matt Kornack, analyst]

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?

[Alexander Sannikov, executive]

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.

[Matt Kornack, analyst]

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?

[Alexander Sannikov, executive]

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.

[Matt Kornack, analyst]

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

[Alexander Sannikov, executive]

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.

[Matt Kornack, analyst]

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?

[Lenis Quan, executive]

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.

[Matt Kornack, analyst]

Congrats on a solid quarter, guys.

[Operator]

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

[Tal Woolley, analyst]

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?

[Alexander Sannikov, executive]

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.

[Tal Woolley, analyst]

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]?

[Alexander Sannikov, executive]

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.

[Tal Woolley, analyst]

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?

[Alexander Sannikov, executive]

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.

[Tal Woolley, analyst]

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?

[Alexander Sannikov, executive]

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.

[Tal Woolley, analyst]

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?

[Alexander Sannikov, executive]

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.

[Operator]

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

[Pammi Bir, analyst]

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?

[Alexander Sannikov, executive]

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.

[Pammi Bir, analyst]

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

[Alexander Sannikov, executive]

No, not yet.

[Pammi Bir, analyst]

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.

[Alexander Sannikov, executive]

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.

[Pammi Bir, analyst]

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?

[Alexander Sannikov, executive]

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.

[Operator]

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

[Alexander Sannikov, executive]

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

[Operator]

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