Q: In their earnings report yesterday, Dream Industrial REIT indicated their net asset value per unit was $16.79. With a current unit price of only $11.96, the NAV is 40% higher than the current market price of the units. Is this large a discount to NAV unreasonable? Are the units really that undervalued? It trades at about 12 times FFO. Is that a cheap valuation and is that a more significant way of looking at the unit price than the net asset value?
5i Research Answer:
NAV consists of many estimates, any of which can cause big swings. For example, if interest rates rise NAV can be materially impacted. Transaction prices vary widely. Most REITs currently trade below NAV and we would not really see it as a good metric. We think price/cash flow is better. 12X is on the low end of the scale vs peers. Note, we have some other comments on DIR.UN posted today in the Q&A.