The private equity giant Blackstone Group Inc. is buying Dream Global Real Estate Investment Trust, a Canadian company founded by real estate magnate Michael Cooper, which specializes in European properties.
Blackstone will have to pay $ 16.79 in cash per Dream Global share, for a total purchase price of $ 3.3 billion, an 18.5% premium on Friday's closing price. After accounting for Dream Global's debt, the deal is worth $ 6.2 billion.
Headquartered in Toronto and managed by Jane Gavan, one of Mr. Cooper's long-standing business partners, Dream Global has been listed on the stock exchange since 2011. The real estate trust, formerly known as Dundee International REIT, began by buying leased real estate at Deutsche Post, the German post office, and over time has grown to focus on properties mainly based in Germany and the Netherlands.
With the acquisition of Dream Global, Blackstone is adding exposure to the European real estate sector, which is an attractive asset class in a world where billions of dollars of debt pay negative returns.
The agreement also signals Blackstone's growing interest in Canadian REITs. At the beginning of 2018, the American company acquired Pure Industrial REIT, which owned industrial properties throughout Canada and selected US markets whose tenants included IKEA and Fedex distribution services, for a stock value worth $ 2.5 billion.
The acquisition of Dream Global is a significant milestone for Mr. Cooper. He is known to have managed Dream Office REIT and made a national leap in 2012 by acquiring Scotia Plaza in the heart of downtown Toronto for $ 1.3 billion.
Released from the global financial crisis of 2008-2009, it has also created two other REITs – Dream Global and Dream Industrial REIT – each with an exposure to a different area of the real estate sector. Until 2013, his portfolio worked well, like most Canadian REITs, because retail investors sought investments that paid significant returns, often around 6% annually, while interest rates collapsed.
However, the large REIT demand eased in 2013 amid fears that interest rates will start to increase. A year later, Dream Office was hit hard due to its exposure to Calgary office properties when the oil and gas market turned.
Recently, however, the REIT sector has rebounded because interest rates are falling back globally and this has helped strengthen the values in the REIT Dream family. Cooper has also successfully repositioned Dream Office focusing on the downtown Toronto market.
Blackstone is acquiring Dream Global at a time when market strategists are predicting a "lower longer" era – which means interest rates should remain lower for even longer periods of time . Given these market dynamics, commercial real estate has the potential to prosper for a long time.
As part of the transaction, Blackstone is paying $ 395 million directly to Dream Asset Management, which is managed by Dream Unlimited, another of Cooper's publicly traded companies. Cooper has a 36% stake in Dream Unlimited, according to Refinitiv.