Dream announced that it has agreed to buy U.K. industrial developer and asset manager Chancerygate for $147 million.

Dream Industrial REIT (DIR) will acquire the U.K. company's wholly owned real estate assets and co-investment interests across its managed ventures, while parent company Dream Unlimited Corp., will assume Chancerygate's investment management and development platform, the announcement said.

DIR is committing an additional $47 million to complete ongoing Chancerygate developments. The U.K. company has a 30-year track record in the multi-let industrial (MLI) sector. 

In an interview with RENX, DIR president and CEO Alexander Sannikov said the REIT has been looking for good opportunities in the U.K. and Europe for some time.

"Dream Industrial has been building out its private partnerships business for a few years now, and has very sizable JVs in Canada... and some private partnerships in the U.S., with about $9 billion in these private vehicles, where DIR is co-investing and acting as property manager," Sannikov said. 

He added: "It's not just doing JVs, but doing the right kind of JVs that give us scale, (and) the way we partner with like-minded institutional investors."

Move takes Dream's AUM to over $30 billion

Acquiring Chancerygate also offered the opportunity to step into existing partnerships with over $2 billion in assets, he added. "We're taking kind of a transition in those partnerships in the U.K., and (it) creates opportunities for us to build out the property management platform."

In addition to leading DIR, Sannikov is joint president of asset management with Jamie Cooper of Dream Unlimited Corp.

Cooper said the transaction takes Dream's assets under management over $30 billion. "We view that as a meaningful milestone, and this is also going to help accelerate the continued growth of our business in continental Europe as well as in the U.K.," he said.

The management team at Chancerygate will remain in place and, at this point, Dream has no plan to rebrand the acquisition. "It's a strong brand, especially in the U.K., (it's) been operating for 30-odd years in the market," Sannikov said. "(It's a) well-known operator and developer." 

The deal is expected to close next month. DIR intends to fund the acquisition through a combination of cash on hand, assumed debt and its unsecured revolving credit facility. 

Portfolio details

DIR takes on a wholly owned MLI portfolio of 510,000 square feet which includes four U.K. projects and one in Spain.

• One U.K. project of 104,000 square feet has reached substantial completion.
• Two projects totalling 184,000 square feet are expected to complete in Q3.
• The remaining two projects have a multi-tenant layout and can accommodate up to 20 tenants. They are expected to complete in the second half of 2027.

In addition, DIR gains access to Chancerygate's existing JVs with a total gross asset value of $2.2 billion

"The existing joint venture portfolio is comprised of 4.7 million square feet of existing MLI assets and 3.2 million square feet of assets in various stages of development," the announcement said.

DIR will acquire Chancerygate’s minority stake in those joint ventures for approximately $43 million, representing an expected stabilized cap rate of over 7.5 per cent upon completion of development projects and realization of built-in mark-to-market potential on existing assets.

The bulk (90 per cent) of the assets in the existing JVs are located in the U.K.

The transaction also includes an expected five per cent stake in a new JV with a "leading global institutional investor" to form a new programmatic JV. 

Sannikov said the new JV will look for assets, primarily in continental Europe, with a target size of $800 million.

"That gives us opportunities for the REIT to leverage its property management platform in Germany and the Netherlands, and gives more scale to the overall platform," he said.

Kirkland & Ellis LLP is acting as U.K. legal counsel to DIR. Deloitte is acting as tax advisor and CBRE and Colliers are acting as real estate advisors to the REIT.

About Dream Industrial REIT

Dream Industrial REIT is an owner, manager, and operator of a global portfolio of industrial properties. As of March 31, Dream Industrial had an interest in and manages a portfolio comprising 343 industrial assets totaling approximately 74.1 million square feet of gross leasable area in key markets across Canada, Europe, and the U.S.