UPDATED: Dream Industrial REIT (DIR-UN-T) and Singapore-based investment manager GIC have formed a joint venture to acquire Summit Industrial Income REIT (SMU-UN-T) in an all-cash transaction that values the trust at approximately $5.9 billion.

The Monday-morning announcement indicated Summit unitholders will receive $23.50 per unit  in cash for their shares. The investment is a 31 per cent premium to Summit’s closing price on Nov. 4, a premium of 33.4 per cent to its 20-day weighted average price and a 19.5 per cent premium to Summit’s current consensus estimated NAV of $19.66 per unit.

"We are pleased to provide an immediate and certain premium value to our unitholders through this all-cash transaction with GIC and Dream," said Paul Dykeman, chief executive officer of Summit, in the announcement. "The entire board of trustees and management team are proud to have executed on our strategy to develop and aggregate an attractive, diversified portfolio with a team that is dedicated to delivering best-in-class services to our tenants, and this value optimization transaction represents a successful culmination of these efforts. 

“We are confident this transaction is in the best interest of the REIT and unitholders."

The arrangement is structured with GIC as a 90 per cent partner, and Dream holding the other 10 per cent. Dream Asset Management will be the property manager for the venture.

"Highly strategic transaction" for Dream

The transaction remains subject to unitholder and regulatory approvals, and is expected to close in early 2023.

"We are pleased to bring GIC's expertise in real estate investing together with Dream's 25 years of experience as a world-class real estate developer, owner and asset manager. Through our partnership, Summit's assets will be positioned for continued success," said Lee Kok Sun, chief investment officer of real estate for GIC, in the release.

"Summit has a premier portfolio of industrial properties defined by strong sector fundamentals, resilient cash flows, and stable market rent growth in key markets across Canada," said Adam Gallistel, head of Americas real estate for GIC, in the release. "This is another strong addition to GIC's global real estate portfolio."

The Summit acquisition represents what Dream calls a “highly strategic transaction”, growing its exposure to the Canadian industrial market, diversifying its revenue streams through growth of its property management vertical, and introducing a new source of growth capital in high-growth industrial markets.

"We are excited to announce this transformational transaction," said Brian Pauls, chief executive officer of Dream Industrial REIT, in the announcement. "Combining with Summit will add scale and quality to our Canadian platform and amplify our fee generation business. The commitment from GIC, a best-in-class, global sovereign wealth fund investor, to partner with DIR on this large-scale transaction is a testament to the quality of our employees, platform and vision as a leader in the Canadian industrial space.

"This transaction will provide DIR with the ability to grow accretively with a more diversified source of growth capital."

The transaction will significantly increase Dream's property management business. Upon closing, Dream Industrial will manage 69 million square feet across Canada, USA and Europe, including 32 million square feet on behalf of its institutional clients in North America. 

It will also more than double the scale of Dream Industrial’s Canadian industrial portfolio under management, with total GLA of 43 million square feet. Dream Industrial's pro forma exposure by owned GLA will be approximately 53 per cent in Canada, 41 per cent in Europe and six in the United States.

 "We have been impressed by Summit and their continued strong execution and we are thrilled to welcome an exceptional team to Dream," said Michael Cooper, the founder of Dream Group of Companies and a trustee of Dream Industrial REIT, in the announcement. "Summit's business fits perfectly with Dream's experience and management expertise, and we look forward to partnering with GIC."

GIC and DIR have agreed they will continue to pursue acquisition opportunities in major Canadian industrial markets.  

Summit's industrial portfolio

Over 99 per cent of Summit’s portfolio properties are located in geographies where Dream Industrial already operates. The combined portfolios are focused on “high quality logistics and warehousing assets in Canada's largest urban markets”, with approximately 60 per cent of total GLA in the Greater Toronto and Montreal Areas. 

The Summit portfolio also offers significant opportunity to generate strong future NOI growth. The Summit acquisition will also increase Dream Industrial's development pipeline from 6.5 million square feet to 11.1 million square feet (on a 100 per cent basis).

The Dream and GIC venture intends to assume Summit's $925 million of outstanding unsecured debentures, as well as Summit's existing mortgages.

Dream and GIC have financing through TD Securities to backstop the mortgages, and Toronto-Dominion Bank has underwritten a $400-million revolving credit facility for future liquidity requirements. The financing has been structured with the intent of Dream and GIC maintaining Summit's current DBRS Limited BBB credit rating with a positive trend.

Summit expects to hold a special meeting of unitholders to vote on the transaction in mid-December  Summit will release its Q3 financial results on Nov. 9, but, as a result of this announcement will not host an investor conference call.

About Dream, GIC

GIC is a global investment firm established in 1981. As the manager of Singapore's foreign reserves, GIC takes a long-term approach to investing across a wide range of asset classes and strategies. These include equities, fixed income, real estate, private equity, venture capital and infrastructure.

Headquartered in Singapore, GIC employs over 1,900 people in 11 major financial cities and has investments in over 40 countries.

Dream Industrial REIT is an unincorporated, open-ended real estate investment trust. As at Sept. 30, Dream Industrial REIT owned, managed and operated 258 industrial assets totalling approximately 46.5 million square feet of gross leasable area in key markets across Canada, Europe, and the U.S.

Dream Industrial REIT's objective is to continue to grow and upgrade the quality of its portfolio which primarily consists of distribution and urban logistics properties. 

Dream Unlimited Corp. is a Toronto-based developer of office and residential assets, owns stabilized income generating assets in both Canada and the U.S., and has an asset management business, inclusive of $17 billion of assets under management across four Toronto Stock Exchange listed trusts, a private asset management business and numerous partnerships.

Dream also develops land and residential assets in Western Canada. Dream expects to generate more recurring income in the future as its urban development properties are completed and held for the long term.