The deal values Dream Global at $16.79 per share, a premium of 18.5 per cent of its closing value on the TSX on Friday. In a release on Sunday night, Dream says the valuation represents a total 2019 return of 47 per cent, if the transaction is approved by all required parties.
“This transaction is the culmination of the tremendous growth that Dream Global has achieved since its 2011 IPO. At a time when the Western European real estate market is becoming increasingly competitive, this transaction provides premium value to unitholders,” said Detlef Bierbaum, chairman of Dream Global’s board of trustees, in the release.
“Upon completion of the transaction, Dream Global will have increased its equity market capitalization by nearly eight times and will have delivered total annualized returns of 15 per cent to our unitholders, since inception, which exceed both the Canadian and European REIT benchmarks by approximately 60 per cent and are competitive against the best managed real estate private equity funds and pension funds globally, over the same time period.”
Since inception, Dream Global will have generated a total return of 214 per cent, the REIT says.
“Today’s announcement can be attributed to Dream Global’s high-quality portfolio of properties located in key markets in Western Europe and the strength of our property management platform, as evidenced by our strong relationships with tenants, partners and lenders,” said Jane Gavan, president and CEO of Dream Global, in the release.
“By combining a disciplined approach to capital allocation with active asset management, we have established Dream as one of the most respected brands for investing in Western European office properties.”
Dream Global says its portfolio was created at an average acquisition cap rate of 6.8 per cent, including its significant Netherlands portfolio at an eight per cent transaction cap rate in 2017. It consists of over 200 properties located in over 100 Western European cities.
“We are delighted to be acquiring Dream Global, a high-quality and diversified portfolio of office and logistics assets in Western Europe, which has been created by Dream over the last eight years,” James Seppala, head of Blackstone real estate Europe, said in the release.
“This transaction is an exciting opportunity for Blackstone to expand its existing office and logistics portfolios in some of the largest and most important markets in the region.”
Dream created the vehicle in 2011 to invest in European real estate during a time when the outlook for European real estate was guarded. Dream then acquired a billion-dollar portfolio of 292 properties, consisting mostly of German post offices.
The portfolio was funded in part through the $470 million IPO of Dream Global, in which Dream invested $120 million.
Since the IPO, Dream Global sold over 200 of the original assets and transformed itself into a portfolio of core-plus office assets in Germany, Austria, Belgium and the Netherlands, as well as light industrial and development.
The current real estate environment in Western Europe is extremely competitive, with exceptionally low interest rates and property valuations at record-setting levels.
While Dream Global has made great progress building a European unitholder base over the last two years, management says the public REIT structure has resulted in a cost of capital for Dream Global that remains higher than some peers and impacts the REIT’s ability to continue its growth.
Dream Asset Management (DAM), a subsidiary of Dream, established the REIT in 2011 and has served as the external asset manager since inception. As part of the transaction, DAM will receive an aggregate of $395.2 million to terminate that relationship.
The transaction is subject to the approval of at least 66 2/3 per cent of unitholders, as well as a majority of unitholders other than DAM and related parties. It is also subject to customary conditions including regulatory approvals, and is expected to close in December 2019.
The Dream Global board is unanimously recommending unitholders vote in favour of the transaction.
About Dream Global REIT
Dream Global is an owner and operator of a diversified portfolio of office and industrial properties located in key markets in Western Europe with a focus on Germany and the Netherlands.
The REIT’s in-house platform comprises over 140 local leasing, property management, asset management and development professionals operating out of 13 offices in Europe and North America.
Blackstone is one of the world’s leading investment firms.
Its businesses, with $545 billion in assets under management, include investment vehicles focused on private equity, real estate, public debt and equity, non-investment grade credit, real assets and secondary funds, all on a global basis.