Private equity giant Blackstone Group Inc. is buying Dream Global Real Estate Investment Trust, a Canadian company founded by real estate magnate Michael Cooper that specializes in European properties.
Blackstone is to pay $16.79 in cash per share of Dream Global, for a total purchase price of $3.3-billion – an 18.5-per-cent premium to Friday’s closing value. After accounting for Dream Global’s debt, the deal is worth $6.2-billion.
Based in Toronto and run by Jane Gavan, one of Mr. Cooper’s long-time business partners, Dream Global has been publicly traded since 2011. The real estate trust, formerly known as Dundee International REIT, started out by acquiring properties leased to Deutsche Post, Germany’s post office, and over time grew to focus on properties primarily based in Germany and the Netherlands.
By acquiring Dream Global, Blackstone is adding exposure to European real estate, which is an attractive asset class in a world where trillions of dollars worth of debt now pays negative yields.
The deal also signals Blackstone’s growing interest in Canadian REITs. In early 2018, the American company acquired Pure Industrial REIT, which owned industrial properties across Canada and select U.S. markets and whose tenants included IKEA Distribution Services and Fedex, for an equity value worth $2.5-billion.
Dream Global’s acquisition is a significant milestone for Mr. Cooper. He is best known for running Dream Office REIT and made a splash domestically in 2012 by acquiring Scotia Plaza in the heart of downtown Toronto for $1.3-billion.
Coming out of the 2008-2009 global financial crisis, he also created two other REITs – Dream Global and Dream Industrial REIT – with each offering exposure to a different area of real estate. Until 2013, his portfolio performed well, as did most Canadian REITs, because retail investors sought out investments that paid substantial yields, often around 6 per cent annually, while interest rates tumbled.
Yet broad demand for REITs softened in 2013 amid fears that interest rates would start rising. A year later, Dream Office was hit hard because of its exposure to Calgary office properties when the oil and gas market turned.
Lately, however, the REIT sector has rebounded because interest rates are falling again globally, and that has helped to boost values in the Dream family of REITs. Mr. Cooper has also successfully repositioned Dream Office by focusing on the downtown Toronto market.
Blackstone is acquiring Dream Global at a time when market strategists are predicting a return to the era of “lower for longer” − meaning interest rates are expected to remain lower for even longer periods of time. Given these market dynamics, commercial real estate has the potential to thrive for much longer.
As part of the transaction, Blackstone is paying $395-million directly to Dream Asset Management, which is run by Dream Unlimited, another one of Mr. Cooper’s publicly traded companies. Mr. Cooper has a 36-per-cent stake in Dream Unlimited, according to Refinitiv.
Tim Kiladze
Rachelle Younglai