Blackstone to Acquire Dream Global REIT for $6.2B

TORONTO – Dream Global REIT has entered into an agreement to be acquired by real estate funds managed by Blackstone. Blackstone will acquire all of Dream Global’s subsidiaries and assets in the all-cash $6.2 billion transaction.

The transaction attributes to Dream Global as a respected brand for investing in Western European office properties. The REIT has built a property management platform and a diversified portfolio of office and logistics assets located across key markets across Western Europe, within the past eight years. Blackstone recognizes this transaction as an opportunity to expand its office and logistics portfolios in the regional markets.

Upon the closing of the transaction, Dream Global unitholders will receive a cash consideration of $16.79 per unit, representing an 18.5% premium to the closing price of units on the Toronto Stock Exchange on September 13^th, 2019, the last trading day prior to the announcement of the transaction, representing a total return for 2019 of 47%. Providing premium value to unitholders, Dream Global will have increased its equity market capitalization by nearly eight times and will deliver total annualized returns of 15% to unitholders since inception, exceeding both the Canadian and European REIT benchmarks by 60%.

Dream Global’s real estate portfolio, currently consisting of more than 200 properties across more than 100 Western European cities, was created at an acquisition cap rate averaging 6.8%.

The closing of the transaction will be rely on the approval of at least 66 2/3% of the unitholder’s votes, which will be cast at a unitholder meeting. The transaction is additionally subject to other customary conditions such as regulatory approvals, and is expected to close in December of 2019. The transaction is not subject to a financing condition. The acquisition agreement provides customary representations, warranties, covenants and allows for a termination fee payment to Blackstone, as well as a reverse termination fee to Dream Global.

Dream Unlimited Corporation’s subsidiary, Dream Asset Management, established the public REIT in 2011 to invest in European real estate. The company quickly acquired a $1 billion portfolio of 292 properties to establish its platform, and has since sold more than 200 of the original assets, transforming itself into a high-quality portfolio of assets.

Currently, the Western European real estate environment displays low interest rates and property valuations at record setting levels. While Dream Global has made progress in building a European unitholder base in the past two years, the public REIT structure has resulted in a cost of capital for the REIT that remains higher than others, impacting its growth trajectory. This transaction offers the ability to deliver premium value to the REIT’s unitholders, closing the value gap and forming established returns to unitholders.

Dream Asset Management has served as the external asset manager since inception of the REIT. This transaction requires a separation of the REIT from Dream Asset Management. Subsequently, the Dream Global board of trustees has formed a special committee of independent trustees to oversee the separation process and the transaction negotiations. National Bank Financial Inc. and Goodmans LLP have been retained by the committee to provide independent financial and legal advice, respectively.

The special committee negotiated a separation payment of $395.2 million to Dream Asset Management, based on the advice received, considering the incentive fee valued at $379 million under the asset management agreement.

Dream Global has effectively suspended its monthly distributions, following the payment on September 16^th, 2019 of its August distribution.

TD Securities is serving as a financial advisor to Dream Global for the transaction. Osler, Hoskin & Harcourt LLP and Greenberg Traurig Germany LLP are acting as legal counsel to Dream Global in the transaction. RBC Capital Markets, BNP Paribas and Deutsche Bank Securities Inc. are serving as Blackstone’s financial advisors. Davies Ward Phillips & Vineberg LLP and Simpson Thacher & Bartlett LLP are serving as legal counsel to Blackstone.

Further information regarding the transaction will be included in the management proxy circular expected to be mailed to Dream Global unitholders in October 2019.

In other Blackstone news, the company recently closed its latest fund, Blackstone Real Estate Partners IX, with $20.5 billion in total capital commitments. Additionally, Blackstone recently acquired a 68-property logistics portfolio from TA Realty LLC.

Dream Global REIT is an owner and operator of a diversified office and industrial portfolio across Western Europe. The REIT’s in-house platform encompasses more than 140 professionals operating out of 13 offices in Europe and North America.

Blackstone is a leading global investment firm with $545 billion in assets under management, which focuses on private equity, real estate, public debt and equity, non-investment grade credit, real assets and secondary funds.