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Dream Industrial Real Estate Investment Trust
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Good morning, ladies and gentlemen. Welcome to the Dream Industrial REIT Third Quarter 2019 Conference Call for Wednesday, November 6, 2019. During this call, management of Dream Industrial REIT may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking statements 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 results to differ materially from those that are disclosed in or implied by such forward-looking information. Additional information about these assumptions and/or risks or uncertainties is contained in Dream Industrial REIT's filings with securities regulators, including its latest annual information form MD&A. These filings are also available on Dream Industrial REIT's website at www.dreamindustrialreit.ca [Operator Instructions] Your host for today will be Mr. Paul -- Brian Pauls, CEO of Dream Industrial REIT. Mr. Pauls, please go ahead.
Thank you. Good morning, everyone. Thank you for joining us today for Dream Industrial REIT's 2019 Third Quarter Conference Call. Speaking with me today is Lenis Quan, our Chief Financial Officer. Through 2019, we have been focused on driving same-property NOI growth, adding scale in our target markets and enhancing overall portfolio quality. We have and continue to make progress on each front and have done so in conjunction with improving and maintaining a safe and flexible balance sheet. During the quarter we completed the sale of the Eastern Canada portfolio, providing enhanced flexibility to add scale in our target markets and acquire properties with stronger future cash flow and asset value growth. We will continue to look at opportunities to selectively prune our portfolio, including assets in noncore markets and/or those that we believe are fully valued with lower growth potential. One of these opportunities is 439 Sovereign Road in London, Ontario, which we have agreed to sell. This 78,000 square foot property is currently vacant, and we expect to complete this disposition in the fourth quarter. Consistent with our strategy to recycle capital into higher-quality assets, we are pleased to announce that the Trust, Dream Unlimited and PAULS Corp., are in exclusive negotiations to acquire an interest in a 24-acre development site in North Las Vegas. This is an attractive partial that will support the development of a 400,000 square foot plus class A industrial building. The site is well located in a strong industrial subnode that includes e-commerce players, such as Amazon and Bed Bath & Beyond. PAULS Corp. is expected to serve as a development manager and as a strong development platform with an extensive track record in commercial development, having developed over 16 million square feet of real estate across Canada and the U.S., including Las Vegas. The industrial market in Las Vegas is one of the fastest growing markets in the U.S. Overall vacancy remains low, and net absorption continues to outpace completions with increasing rental rates driven largely by the increase in e-commerce. Several California companies are choosing to relocate or expand into Las Vegas due to lower rents, access to lower-cost labor, close proximity to large population centers and a faster permitting process. We're excited to initiate our development program and will provide further details in upcoming quarters. We are also currently under contract to acquire a 600,000 square feet industrial portfolio in Kitchener, Ontario. The expected purchase price of $62.5 million represents a going-in cap rate of 5.2%, and we see opportunities to increase rents and drive free cash flow growth. The portfolio consists of small- and mid-bay buildings and has a strong and diverse tenant base that are well-situated in an attractive business park. The acquisition is expected to close in December. Separately, we are in advanced negotiations to add an additional 40,000 square foot property within the same park for $5.7 million. The Waterloo industrial market is comprised of Kitchener, Waterloo, Cambridge, Guelph and Brantford. It has and continues to benefit from strong fundamentals as modest new supply, minimal availability and solid demand have resulted in strong rental growth across the market. Within the Kitchener market, rental rates have increased by 14% year-to-date, with availability currently sitting at 1.4%. Our acquisition pipeline continues to be robust with approximately $300 million of properties that we are actively in the process of evaluating and underwriting. We are well-positioned to capitalize on these opportunities with a solid balance sheet and strong liquidity. We are currently in advanced negotiations on approximately $80 million of acquisitions, predominantly in the GTA, which should close in the first quarter of 2020. As we deploy our acquisition capacity, we expect target leverage to be in the high 30s to low 40s. We will remain disciplined with our acquisition strategy, targeting properties and markets that improve our portfolio quality with opportunities to grow free cash flow and increased net asset value per unit. This year, we have looked at over $1 billion of properties or portfolios, both marketed and off market. We remain focused on acquiring higher-quality properties that will increase in value over time. These trade at lower going-in yields but offer tremendous growth opportunities, which we expect to unlock through our active asset management strategies. As a result, we expect the yield on targeted assets and their values to increase over an extended period of time. Looking at our markets, Canadian industrial market fundamentals remain strong, with the national availability rate containing to trend lower at 2.9%. This marks the first time that national availability has dipped beneath 3%. We'd note that Toronto and Montréal have amongst the lowest availability of any North American industrial market. The national average net asking rent increased to $8.63 per square foot, representing a 3.5% increase quarter-over-quarter and a 16% increase year-over-year. The increase has been largely driven by gateway industrial markets, including Toronto and Montréal. In Q3, the market experienced 8.5 million square feet of absorption with 5.7 million square feet of new supply. In our U.S. markets, we continue to see strong demand for industrial real estate, resulting in low availability and growth in property values. Active asset management is an important foundation to our strategy. Our focus on driving rents, capturing leasing spreads and renewals or expires has led to strong same-property growth in Ontario and Québec. In Ontario, approximately 312,000 square feet of leases commenced during the quarter with an average spread of 22% over prior rents. On approximately 1 million square feet of lease commitments taking occupancy in 2019, we have achieved an average spread of 16% over prior rents. Occupancy dipped 100 basis points largely due to the anticipated departure of 111,000 square foot tenant in Mississauga. We have already seen solid leasing interest given the property's attractive location at Highway 401 and Mississauga Road. We are actively trading paper at rates over 10% above what the last tenant was paying. We see this as an opportunity to drive rent growth upon lease-up due to the tight market availability. As an example, we recently completed a 5-year renewal with a tenant occupying 80,000 square feet in the GTA. On this deal, we achieved a 94% spread to expiring rent with only $1.50 per square foot in total leasing capital. The lease commences in May of 2020 and includes 3.5% annual escalators over the 5-year term. In Québec, approximately 117,000 square feet of leases commenced during the quarter at an average spread of 12.3% over prior rents. In 2019, we had 757,000 square feet of lease commitments in Québec at an average spread of 12.1% over expiring rents. In Western Canada, we've been focused on driving occupancy and we are seeing results with positive net absorption of 77,000 square feet this quarter and committed occupancy at 96%. Across our competitive portfolio, year-over-year, we have seen a 3.1% increase in average occupancy and comparative properties NOI growth of 7%. While there continues to be some pressure on expiring rental rates, we are building contractual rent growth in our leases and we remain focused on investing capital prudently. Occupancy in our U.S. portfolio is strong at 94%. We had 2 anticipated vacancies in Columbus, totaling 121,000 square feet. We're in the process of demising the units into smaller suites and are confident these will result in a quick lease-up at higher rental rates. At one of the locations, 66,000 square feet has been demised into 3 units. 2 out of the 3 leases have been signed. These leases are expected to commence over the next 2 quarters, and we are achieving nearly 20% rental increases over prior rates. In 2019, we have signed 371,000 square feet of leases commencing this year in our Midwest U.S. portfolio. These leases are at an average spread of 21% over prior rents. We have received strong interest from potential tenants at our 303,000 square foot property in Louisville due to its strategic location right off the I-65 and close proximity to the UPS Worldport, and we expect this space to be leased in early 2020. Overall, our strategic initiatives have positioned us well for above-average free cash flow and net asset value growth over the long term. I will now turn it over to Lenis, who will provide our financial update.
Thank you, Brian. Diluted funds from operations for the third quarter was $0.19 per unit compared to $0.21 in the third quarter of 2018. Higher FFO from strong comparative properties NOI growth across all regions and acquisitions was offset by the impact of lower average leverage, which decreased by approximately 9% year-over-year, and is consistent with our strategy to maintain a stronger balance sheet with financial flexibility. Comparative property NOI increased by 6.4% compared to the third quarter of 2018 largely driven by increased occupancy in Western Canada and higher rents in Québec and Ontario. Western Canada experienced comparative property NOI growth of 7%, with Québec and Ontario at 10.7% and 3.6%, respectively. At the end of the third quarter, the IFRS value of our portfolio was $2.3 billion. This reflects $353 million of investment property acquisitions during the year, the sale of the Eastern Canada portfolio and $89 million in fair value gains driven primarily in Ontario and Québec. The fair value increase reflects strong leasing activity, market rent growth and lower capitalization rates. The Trust's reported net asset value, or NAV, per unit has increased by $0.55 this year or 5% to $11.09 at the end of the third quarter. On a year-over-year basis, NAV per unit has increased by $0.97 or approximately 10%. We have made excellent progress in improving the safety of our business. Our net debt to assets ended the quarter at 31.4%, and our net debt-to-EBITDA was 5.4x. At quarter end, our balance sheet was solid and liquidity remained strong with unencumbered assets totaling $345 million, $130 million of cash on hand and full availability on our $150 million credit facility. This provides significant financial flexibility to execute on our acquisition pipeline and to pursue development opportunities. We expect comparative properties NOI growth to be at the upper end of our previously communicated 3% to 3.5% range for 2019, excluding assets held for sale. We are finalizing the budget for our annual December strategy planning session and will provide more detailed guidance for our 2020 performance at -- on our year-end conference call in February. We expect Q4 FFO per unit to be lower than Q3 due to the timing of capital deployment following the sale of the Eastern Canada portfolio this quarter. We have $150 million of acquisitions that are currently under contract or in advanced negotiations and are expected to close in December 2019 and early 2020. We expect our leverage to increase to approximately 35% after these acquisitions close with an additional $170 million of acquisition capacity, assuming 40% leverage. As Brian noted, we are focused on improving our overall portfolio quality, and this includes acquiring higher-quality properties in our target markets that are consistent with our investment criteria. With that, we will be prudent in deploying our capital and maintain a strong balance sheet, ample liquidity and flexibility to pursue attractive opportunities. Over the long term, we are targeting leverage in the high 30s to low 40s. We are confident that this strategy will result in a more stable portfolio with higher quality as well as stronger cash flow and NAV growth potential over the long term. I will now turn it back to Brian to wrap up.
Thank you, Lenis. We are pleased with the progress made in transforming the Dream Industrial portfolio and, at the same time, improving and maintaining a strong and flexible balance sheet. We remain committed to driving unitholder value through organic income growth and using our balance sheet strength for attractive investment opportunities, including income property acquisitions and developments that meet our investment criteria. We'd now be happy to take any questions.
[Operator Instructions] And our first question comes through Frederic Blondeau from Echelon Wealth.
Just looking at the capital structure, Lenis, you were just mentioning, I guess, post-acquisition, high 30s to low 40s. Is it fair to say that you're at your target leverage at this stage?
Yes. Our target leverage over the long term is going to be around -- in the high 30s to low 40%. So I think that's the -- that's what the -- that's what our acquisition capacity would be.
Okay. And...
We sit lower than that. Right now, Fred, we sit lower than that. So we've got some acquisitions that we can do within that kind of leverage target.
Yes. You said 35 post acquisition, so yes.
Yes.
Okay. And it looks like you will put a greater emphasis on development. What are your views on development yields? And I guess what would be your internal required development yield?
It will depend on the market. Right now, we're looking at 6% or high 5s in terms of development yield. We're building to core, we're building to hold. It's an opportunity for us to get class A kind of best-in-class properties that we couldn't necessarily afford to buy. In many cases, in the markets that we're looking at building, when you buy, you're buying at above replacement cost, so building makes a lot of sense. So in round numbers, to answer your question specifically, I think 6% is a good target development yield, although it may be lower than that in some markets.
So for example, like maybe more specifically on Vegas, what would be your expected yield there?
6%.
And the next question comes from Chris Couprie from CIBC.
Got a question regarding Vegas. So I guess, how did this opportunity come to you? Why did you select Vegas as a market? And can you give us any other kind of color on what the economics might look like in terms of total cost to develop? And additionally, just in terms of how this transaction is going to be structured between yourselves and Dream Unlimited and PAULS Corp.?
Sure. To answer the first part of your question, Chris, Dream Industrial, we along with PAULS Corp. and Dream Unlimited are looking at a number of markets. We're tracking a number of markets, looking for development and acquisition opportunities. This is one of those markets. PAULS Corp. has had a lot of history in Las Vegas as well other U.S. markets. So we have been looking for opportunities there. This was a relationship the PAULS Corp. folks had. They have developed very close to this location, and so it's just a market that we like, we collectively like. We like the growth of this market. We like the distribution kind of metrics and the characteristics of this market. Given how close it is to California, given where e-commerce is heading there, the amount of distribution that flows through there is really in the path of progress. So we like that market. The second part of your question of the economics, this would be a venture between Dream Industrial, Dream and PAULS Corp. Right now, it's set up as an 80-10-10 venture where the DIR is 80%, Dream Unlimited is 10%, PAULS Corp. is 10%. PAULS Corp. would manage the development. Total costs are roughly $96 per square foot. That's a rough number. But in general budget terms, that's about what it costs to build, including land and all-in costs. There's -- the structure is just a straight development structure. There's no promote or there's no premium paid for the development relationship. As we've previously announced, we've got a relationship with both Dream Unlimited and PAULS Corp. to source acquisitions and to resource development, and so this is really just a straight joint venture without a promote.
And the property that's going to be developed, is it going to be built on spec?
Ideally, yes. The plan is to build it on spec. In many cases, a spec property gets to leased as its being built. But we would start it without any tenant commitments.
And what would development yield spreads to kind of market cap rates be right now in that market?
Yes. I mentioned on Fred's question that development yields are roughly 6%. Acquisitions would be -- if you went to buy a fully leased building, it'd be less than that. It'd be in the 5s, probably close to 100 basis point spread.
Okay. And then just in terms of like future development opportunities, is -- in other markets, would it be in a similar type of arrangement? Or would you partner with other developers?
Yes. It's to be determined. We've looked at -- we've had plenty of interest from others who would like to partner. This one is as I've described, and we'll see what happens with other opportunities. But we'd be open to other partners if it was something that was attractive to us and allowed us to maybe spread risk.
Is there any kind of target that you have for on balance sheet development?
No. We'd like to increase from where we sit today. We don't have a specific amount targeted though. It will really depend on opportunities. I think, Chris, we're more limited by opportunities than we are trying to limit it.
And our next question comes from Himanshu Gupta from Scotiabank.
Just a follow-up on the -- on Chris Couprie's question on development yields. So you mentioned 6% development yield. What rent growth are you underwriting on this Vegas property? And you mentioned about spread between California and Vegas market trends. So how big is the spread? And what is the rent growth opportunity there?
Sure. Himanshu, we're -- so we're looking at 3% annual growth for Vegas. But we see -- I think your question was spread to acquisition to development yield. Again, I mentioned that's somewhere in the 100 basis point spread. We see a lot of growth in the Las Vegas market and look for that as a good opportunity for the REIT to acquire or own long-term class A industrial.
Sure. You also mentioned about the rent spread between California market and Las Vegas market and some of the tenants migrating from California to Vegas. So what is the rent spread between California and Vegas? I mean is there a bigger opportunity than just 3%?
Yes. I think there's $1 to $2 per square foot per year spread between California and Las Vegas. The biggest -- the bigger challenge is availability of product. The entitlements and the permitting process in California can be really cumbersome, and so that limits supply. So there's higher costs and longer time-to-market for California products. Companies that domicile in California also pay higher taxes. So there's a lot of reasons for companies to cross the border into Nevada to locate their business.
Sure. And generally speaking, how will you balance the development between U.S. and Canada? I mean do you have any kind of target like going more harder in U.S. or Canada, or depending upon the opportunity?
Yes. We'd like to have a balanced approach developing in both. And we see that as -- it'll be opportunity driven. But if we could pick or target, it would be to develop equally in the U.S. and in Canada.
Got you. Okay. And then switching gears on the acquisition side. And did I hear correctly, you said you almost looked at $1 billion of products over the last several months. When you say $1 billion of product, was it U.S. or was it Canada? And are most of the new acquisitions focused in Canada, I assume?
It's both. The $1 billion is both. I mentioned we're in advanced discussions on $80 million, that's primarily GTA product. So the more immediate acquisitions will be in Canada, although we're looking at both sides of the border. We've got a really strong pipeline. We'll see a lot of acquisitions coming up in the next 6 to 9 months. The early ones will be primarily in Canada, but we're looking on both sides of the border.
Got it. And just on the Kitchener proposed acquisition at 5.2% cap rate. So what are the lease terms there? And are there in-place rents below market, do you think?
Do you want to cover this?
Yes. Sure. So the weighted average lease term on that portfolio is 2.9 years, and the in-place rents, we estimate, are about 10% below market.
10% below market. Awesome. And maybe just last question on the same topic, on the rental spreads. I mean you're obviously very healthy in Ontario and Québec. Do you break out between what rent growth you're achieving on new leases versus renewals? I'm just trying to understand that, I mean, whether the same tenant -- I mean whether the rent accrued is much higher on new leases compared to the renewals.
We don't break that out any longer just because I think for -- especially in the strong markets of Ontario and Québec, we're seeing strong spreads on both renewals and new leases. So we just found that providing the one number just capturing all the uplift was a bit more informative and useful for people just to understand what we're seeing in the market. So we don't break that out any longer. I think we used to just give out renewals, and that just wasn't a big enough picture of what was happening.
Got it. And maybe just, sorry, one last question on the Columbus vacancy. And I think you've mentioned about 20% rent increase is expected there. How long do you think you will be able to backfill that vacancy in Columbus?
Yes. We're in active discussions right now on all the vacancy there. I'd say within the next 6 months, it'll be leased.
And our next question comes from Brad Sturges from IA Securities.
When you think about development and ramping up the program, is there a longer-term target in terms of the type -- the amount of exposure that would be prudent on the balance sheet at any given time?
Bred, I think 10% would be, in round numbers, a good exposure to development. That'll be limited by the opportunities we can find and, as I mentioned, be a balance between Canada and U.S.
Within the broader $300 million pipeline of acquisition opportunities, are there development sites or opportunities you're reviewing right now?
Yes.
Both Canada and the U.S., I assume then?
Yes. Both Canada and the U.S. It's all part of our strategy and things that we're looking at.
So I guess by the end of the year or early 2020, you said leverage would get up to about 35%. If you're getting closer to your target of high 30s or low 40s, is that still more of a time line of mid-2020 at this point?
I would say probably late first quarter, early second quarter to complete those acquisitions that we've mentioned.
Okay. And then I guess you've identified the asset sale potentially in London. Is there anything else at the moment you're looking at selling opportunistically? Or in terms of asset sales, is there much more to do at this stage?
There's not tons, Brad. We've had interest from users on a few of our properties, a few one-offs. We don't have a big strategy or any big portfolio that we'd be looking to sell. I think we're always looking to kind of cull properties that are more valuable in others' hands and provide opportunities to get higher-quality assets. So it's an ongoing thing. It's just a management of the business. It's not any one market that we're exiting or any large portfolio, but we are constantly looking at every asset. So this London opportunity came, it was a good one, it made a lot of sense. We are -- we do have a few other one offs, but I think those will be ongoing as we manage the business.
And our next question comes from Sam Damiani from TD Securities.
Just to -- actually, most of my questions have been answered, but just to start off on the development, is that 80-10-10 JV structure with no promote something that you see replicating in other U.S. markets and potentially in Canada as well?
Yes. I think it's a good model to use going forward. As I mentioned, we've had interest from other partners, institutions, other structures. It's one that we could replicate and one that would be kind of our base case, I would say.
Good. Okay, that's helpful. And just on Louisville, I know you're saying early 2020 now for that. I mean could you maybe be a little more specific or granular in terms of the progress that's been made since the August conference call?
Sure. We've had a lot of interest in it. It's 303,000 square feet, so it's a unique size. The location is great. We're looking for the right tenant. We've had a lot of interest. We've had a lot of broker activity and interest in the property. Ford recently announced they're going to invest $1 billion into Louisville and that is affecting the market. We think that will -- it's only positive for the whole market. So we see a lot of activity. We see a lot of momentum. The absorption has been good in Louisville. So we feel very good about that. That building is really well located, highly functional, it's just a good asset. So we're looking forward to having it leased, and we know it'll get there.
Okay. And just finally on Western Canada, it doesn't get a lot of attention these days. But are fundamentals there starting to turn in such a way that you can see actually see yourselves deploying more capital in that market any time soon?
We have looked -- Sam, we've looked at some opportunities in the west. We've been pushing occupancy in our own portfolio. We're more focused -- I'll say this, we're more focused in Toronto and Montréal and the U.S. than we are in the west. However, we do look at opportunities as they come. And if it's compelling, we're taking a harder look at it. I would say it'd be kind of second-tier target to the other markets that we're looking at for acquisitions.
That's helpful. So you say it's certainly -- that market has been promoted in stature from a couple of years ago?
Yes. I think it's more stable than it was a couple of years ago. It's by no means out of the woods. We're still working hard to raise occupancy. We are working harder to push rents. Some of the old rents are higher than the new rents. So it's still a recovering market. We are even -- we're looking at recycling of some of our own assets in the west. So coming out of older properties that maybe have shown lower growth potential and into new ones within the west that would show higher-growth potential.
And just sort of one final one on the Vegas project. It is meant to be a single-tenant development is the current plan, is that right?
No. No, it's multi-tenant, and so a very flexible building. It's -- I mentioned it's roughly 400,000 square feet. We could easily do 4 100,000s or some combination of 4, 5 tenants.
And the next question comes from Matt Kornack from National Bank.
Sorry if I missed this on your earlier commentary, but for the acquisitions that you're planning to do in Q1 in the GTA, what sort of going-in cap rate should we expect on those?
Matt, I'd expect those to be under 5% or just under 5%. I mentioned really focusing on quality. These come at a lower cap rate cost but offer great growth potential and higher NAV growth and higher free cash flow as the quality is higher. So that's what I'd expect it to be.
And is that growth that you would be anticipating, is that on turnover of leases? Or is it built into the rent escalations already?
Both. It's both. It's in the -- we have growth built into lease terms. I can't say for things that we haven't acquired yet, but we expect to mark-to-market as leases roll as well, and that's a big part of the growth.
And then, I guess, given that commentary on cap rates as well as some recent trades in Montréal that I think shocked some people, you're carrying your portfolio in those 2 markets on the books at 5.3%, and 6.2% cap rates. Is there any view towards potentially taking those lower and taking larger fair value gains? I mean it would also impact your leverage in some of the guidance that you've given on that front as well.
Matt, it's Lenis. Yes, we've had numerous conversations just in terms of the IFRS valuation process. We follow a lot of the guidance and criteria from appraisers. And as these transactions that sometimes shock us go through the market, I think there's a bit of a lag time before some of these -- some of those parameters get updated into the appraiser information. That being said, we focus on continuing to capture the rental growth on -- in our underlying cash flows and NOIs, and that as well would also lead to increasing valuations over time.
And I guess, is there -- if we wanted to take out the potential for market gains, is there a debt-to-EBITDA number that you'd be looking at on the leverage side at this point that we could look to as well.
Sorry, if you...
In terms of stabilized sort of long-term target on debt-to-EBITDA?
Yes. No, no, we're targeting in the 7s.
Okay. Makes sense. And then last question for me. With regards to the vacancies that took place in this quarter, were they at the beginning or end of quarter? So essentially, was there any NOI attributable to that vacancy that won't be in Q3 just from -- sorry, in Q4 from a modeling standpoint?
Yes. So the vacancy that happened in Ontario in the GTA was at the end of July. So you've got a couple of months there. The ones in the U.S., I think it was about 1 month.
One month was in Q3? So 2 months out?
Yes.
[Operator Instructions] And our next question comes from Brendon Abrams from Canaccord.
Brian, just taking a look at the Québec occupancy, it's now over 99%. I know in the past you've spoken about kind of the balance between pushing rents and maintaining high occupancy levels. How are you -- or how is the team kind of positioning the Québec portfolio looking into 2020, maybe 2021 in terms of that balance?
Yes. It's a good...
In other words, could you see yourself sacrificing some short-term vacancy to drive rental growth?
Yes. We are pushing rents. The occupancy is very high there. We're -- I mentioned a few examples in the prepared remarks at the beginning. We'll be doing the same thing in Montréal in terms of pushing rents very hard. So I would see us probably taking on a little bit of vacancy in Montréal short term as a result of pushing rents. But that markets is very tight, and so I think it's a good observation and we'll likely see some of that as we see SPNOI really grow.
As one of the bigger landlords there, what's driving that market in your view? Or what type of tenants are either expanding or seeing new leasing opportunities?
Yes. There's a -- I mean there's a lot of uses for distribution space right now. A lot of retail goods, obviously, are going through warehouses as opposed to retail brick-and-mortar store floors. More and more demand with just very little supply coming on, that's just making it tighter and tighter. So I think what you're seeing in our occupancy rate is a result of just the market getting tighter and tighter. With increased demand, very little supply, there's a big imbalance of where economic rent is, rent that justifies new construction and where rents are today. So we see that continuing to grow, and we're going to be leaders in that and push it.
Okay. And just in terms of the leasing spreads in Ontario, obviously, very strong, over 20%. A little higher than if you look at the year-to-date numbers or even where market rents are relative to your in-place portfolio for that region. Was there anything in particular, 1 or 2 leases, that kind of drove that outperformance? Or was it -- just how should we be thinking of that for kind of 2020?
Yes. I don't know, Lenis, if there's one that stood out. We're pushing rents. I mentioned how many square feet have rolled, and we're pushing rents in all of those cases. So it's an average of all of them. I mentioned one that was recently done, this would've been a fourth quarter one, in my remarks at the beginning that's more of an extreme. But there wasn't 1 that drove it and the others were much lower, I think that's a pretty good representation of everything that rolled during this quarter.
Yes. And I would say that we are expecting to see that trend continue into 2020. I think it's a function of sort of what the in-place rents are that are rolling off on the spaces. So some -- where Brian had mentioned we had a 94% increase rolling off a $4 rent. So in those cases, the spreads will be quite higher. But I think, on average, we're probably seen high teens. It's about even 20% on average for -- even into the next year.
Okay. No, that's very helpful. And then last question for me. Brian, I know you're obviously very familiar with the U.S. industrial Market. There was a big Prologis/Liberty transaction announced not that long ago. I think in their release, they disclosed they'd be looking to sell almost $3 billion in noncore assets on a combined basis. Just wondering your view on whether you -- I guess it's a difficult answer -- question to answer, but could this be a potential opportunity for Dream Industrial down the road as maybe more product comes to market in some markets that you are familiar with?
Possible. We know the Prologis folks quite well. The Liberty Trust properties, there's some good, some bad. We'll look at what we think is good in markets that we like. There's a lot of what we'd call dogs and cats in there. So we're going to look and see what comes available. It's possible it's an opportunity for us. And we'll look at whatever it is that Prologis is looking to dispose of and see if it's an opportunity that fits in well with our strategy.
[Operator Instructions] And we have no further questions.
Thank you, everyone, for your time today, and we look forward to speaking again soon.
Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating, and you may now disconnect.